Tuesday, August 31, 2010

Quick Post - Dan Pink on EconTalk

This weeks EconTalk podcast has Dan Pink talking about his new book "Drive, the surprising truth about what motivates us".

This being a quick post I just want to point out his discussion regarding his research about what motivates people. Pink notes.

Suggest we upgrade to a different approach to motivation, one far less reliant on if/then rewards, not on all rewards but a certain kind of reward, and prizes other sorts of motivators such as autonomy, mastery, and a sense of purpose.
People, Ideas & Objects provides the software to the oil and gas producer. There are substantial services that are associated with delivering this software. The Community of Independent Service Providers is the community that we look too to provide those services to the innovative oil and gas producer.

I see autonomy, mastery and a sense of purpose as being the key motivators of the Community of Independent Service Providers.

Monday, August 30, 2010

Some Advantages of the JOC

Last week we began a comprehensive review of People, Ideas & Objects research and systems development. This review is focused around using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer. It also appears, based on this blog’s analytics, that many of our readers may have been on vacation. I think this review provides substantial value to all our readers, and particularly for those that may have joined us in the past few years. To aggregate the posts that make up this review, please select the Review label on this blog. Last week we were able to summarize the four research questions that were answered in the Preliminary Research Report. Today’s post deals with the advantages of using the JOC.

The JOC is very much involved in the day to day activities of an oil and gas producer. What is surprising is that the ERP systems that are in use in oil and gas do not recognize the JOC. Not until such time as we develop the Draft Specification will we have the systems that align to the legal, financial, operational decision making, cultural and communication frameworks. All of the current ERP systems have been developed during the pre-Internet era. None of these vendors have approached the oil and gas industry from the point of view of the partnerships represented in the JOC, they only recognize the hierarchy of the individual producer. This prompted our assertion that SAP is the bureaucracy. The Preliminary Research Report noted the advantages of using the JOC are as follows.


  • All participants are motivated equally. Financial opportunity drives consensus.


Attaining a consensus when everyone is motivated on the basis of financial incentives is the optimal situation. It is for this reason alone that the JOC provides such strong support for building the systems defined in the Draft Specification. Developing the systems to recognize the decision rights within the JOC will enable the decisions to be made more efficiently and effectively.

Subsequent to the publication of the Draft Specification, and around the time that the iPad was introduced. People, Ideas & Objects asserted that we could use the iPad or other device to have the JOC representatives video conference the meetings. Each representative being in attendance irrespective of when and where they may be. With the software development capability which is a fundamental element of the People, Ideas & Objects offering, these meetings would be supported with automated software that implements the processes and procedures that are decided on by the committee. When the decision was made to re-enter a well to complete another zone, the AFE’s would then be automatically issued and become effective within the system. Fast, high quality decision-making with full implementation of the necessary processes will be the result of producers funding People, Ideas & Objects software developments and Community of Independent Service Providers.


  • The JOC is the legal, financial, operational decision making, cultural and communication foundation of the oil and gas industry. All the internal processes tacitly support this fact.


Moving the compliance and governance frameworks from the hierarchy to be in line with the JOC puts all the frameworks of both the producer and the committee into alignment. As decisions are made by the JOC they are implemented in accordance with the strategy, compliance and governance needs of each individual producer. Each producer employs their own strategy based on the unique makeup of their assets. Just because the producer voted for the recompletion of the other zone, does not impute any element of their corporate strategy or financial metrics to any of the other participating producers.


  • The participants in the JOC hold significant technical and managerial capabilities.


The people that represent the producer firm in the JOC are usually of broad business experience and educational background. Usually sourced from the earth science and engineering disciplines, their focus is developing the oil and gas assets held within the JOC. In many of the smaller producers it is frequently the president that represents the producer. Building the software that identifies and supports these key individuals is the beginning of making the producer more innovative.

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

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Friday, August 27, 2010

Research Question # 4

In our fourth and final installment of the Preliminary Research Report’s research questions. We asked “Does the industry need to change from a “banking” to a “science and engineering” based mindset?

Much of current infrastructure of the oil and gas industry has been developed during a time when the costs associated with exploration and production were reasonable. A time when the efforts of the producer firm could be quantified by determining a reasonable return on investment in oil and gas. This generated what could be considered to be a “banking” mindset that sought to exploit a resource based on a specific return on investment.

That of course is the reasonable approach that any industry will take to the business at hand. To do anything other then approach the business from the return on investment would be foolhardy. What the question being asked is, will the approach of a guaranteed return on investment be capable of dealing with the complexity of a science based business in a resource constrained environment.

With the earth science and engineering disciplines expanding at a significant pace, where each barrel of oil produced requires progressively more science and engineering. With the supply of scientists available to producers being somewhat fixed. To expect this environment to produce a reasonable return on investment with no change in approach from the “easy” energy era will lead to disappointment.

I think the answer to the question is clear. The industry needs to change in order to meet the markets demand for energy. Since the time the Preliminary Research report was published and today, the world energy production has remained static. At a time when a large percentage of the worlds population is moving towards the middle class, the static or potentially declining world oil production is a serious problem for society. It is therefore reasonable to assume that high commodity prices will be with us for the long term. Prices are the reallocation of financial resources to facilitate innovation. Therefore it is also reasonable that the producers with the most innovative capability will have the highest return on their investments.

But lets be clear, changing the stripes on a Tiger is not easy. As we progress into this review we will see that this level of change may not be able to be managed by the current oil and gas producers. Some times the changes occur from an attrition of the existing firms and replaced by new and innovative producers. Either way, People, Ideas & Objects and our Draft Specification are designed to identify and support the successful innovative oil and gas producers.

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

Thursday, August 26, 2010

Research Question # 3

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

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

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

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

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

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

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

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

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

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Wednesday, August 25, 2010

Research Question # 2

The second research question within the Preliminary Research Report was, Can the scope and understanding of the process of innovation; be reduced to a quantifiable and replicable process?

The short answer to this question is yes, most definitely. Which is significant news to most people. People, Ideas & Objects has consistently stated that high commodity prices are the reallocation of the financial resources to enable innovation. We stand at a point in time where the oil and gas industry will change to an innovation based and focused industry. Fascinating times.

It would be difficult to summarize the entire answer to this research question in one post. During the next few months of our review we will be better able to answer this question. Readers in the mean time can also review the Preliminary Research report.

The paper that was used to answer this research question was Professor Giovanni Dosi’s “Sources, Procedures and Macroeconomic Effects of Innovation” September 1988, Journal of Economic Literature, Volume XXVI pp. 1120 - 1171. If you have access to JSTOR or other databases I would highly recommend that you download and review the paper.

Professor Giovanni Dosi makes the statements that,

“The search, development and adoption of new processes and products in market economies are the outcome of the interaction between”:

  • “Capabilities and stimuli generated with each firm and within the industry of which they compete.”

The capacity to enhance reserves of oil and gas is significantly more challenging than as little as five years ago. Exploitation is generally expected to continue, however, an enhanced role for various degrees and types of exploration is expected to commence. The energy frontier brings many new risks and complexity in the area of technical, political and the environment. These account for much of the changes in stimuli and capability that Professor Dosi states are required to facilitate further innovation.

Secondly, the microeconomic trends associated with changes in the relative prices of outputs. Oil and gas prices are beginning to reflect the scarcity, importance and value of these commodities to society.

Dosi notes the second influence to enhanced innovation is;

  • "Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc.”

Innovation and science are iterative upon each other. As the pace of development in earth science and engineering innovations increase, these will have an accelerating effect on the development within the sciences which of course, will lead to further innovations.

These points are only the tip of the iceberg. Professor Dosi’s 1988 paper is renowned for its impact on business innovation. Over the next few months as our review of the Preliminary Research Report and Draft Specification progresses. We will be spending a significant amount of time in Professor Dosi’s paper.

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

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Tuesday, August 24, 2010

Research Question # 1

In addition to the Preliminary Research Reports hypothesis and conclusion, noting the Joint Operating Committee is the “natural” form of organization, there were a handful of research questions that were answered in that report. The four questions and their updated answers will be posted here over the remaining part of this week.

The first question was simply, “Has the hierarchy’s value expired?

This may seem to be an unfair question, but one that most people will have firm opinions on. Alan Murray, Deputy Managing Editor of the Wall Street Journal wrote an interesting piece on the topic in Saturday’s Wall Street Journal. Within the article he documents many of the issues that organizations face. However, it’s the quantity and quality of the comments to the article that show the scope of the debate on the hierarchy’s future. One can clearly see the two camps forming and the ability to influence each other is at somewhat of a stale mate. Opinions are well formed with differing perspectives of the same facts, note the discussion regarding the development of Boeing’s 787 aircraft. This argument has only begun.

Those who believe that we will continue with the hierarchy number in the minority at this point in time. Those that support the hierarchy would assert, correctly, that their needs to be some form of replacement governance model. You just can’t eliminate the well defined model that governs the oil and gas producers organizations. Although we had not developed an alternative in the Preliminary Research report, we eventually did publish the Military Command & Control Metaphor (MCCM) that provides the replacement governance model for both the Joint Operating Committee and producer firms.

By adopting the well understood military chain of command. Applying it over the producer firms involved in a JOC. Allows teams comprised of members from different firms to operate as required within the specific JOC. This pooling of the available technical resources replicates in many ways the manner in which the NATO countries military resources are able to operate.

The ability to pool technical and scientific resources from several of the producers participating within one JOC is critical. Each firm currently have dedicated technical resources and capabilities built within each producer firm. The luxury of having each firm with mutually exclusive technical resources may be over. With each barrel of oil requiring progressively more earth science and engineering, the demand for these resources may begin to outstrip supply. Additionally the time required to train new earth scientists and engineers does not provide for the potential retirement of the brain trust. These resource constraints can be resolved through the use of the MCCM and pooling of the technical resources of the producer firms.

Therefore, the answer to the question for the oil and gas producer is the hierarchy’s value has expired. It is a model that deals with the firms needs, but ignores the JOC. What the successfully innovative producer needs is a governance model that deals with both the producer firm and the JOC’s that they have an interest in. (Particularly when the operational decision making framework resides with the JOC.) For further reading on this topic please review the MCCM of the Draft Specification.

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

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Monday, August 23, 2010

The Joint Operating Committee is Critical

Starting with today’s post we will begin a process of reviewing the data, information and ideas that makes up People, Ideas & Objects and the Draft Specification. This will provide readers with a thorough understanding of the elements that make up this project. These posts can be aggregated by selecting the Review label.

People, Ideas & Objects began with the Preliminary Research Report’s hypothesis asking “if the Joint Operating Committee (JOC), modified with today’s information technologies, provides an oil and gas concern with the opportunity for advanced innovativeness.” The critical breakthrough in the research’s conclusion is the “industry standard JOC is the “natural” form of organization for oil and gas where the participants of the committee are supported and augmented through the diversity and availability of the remaining organizations team members. A greater alignment to this conceptual model would facilitate the desired innovation.”

So if this is how the industry operates why does it need People, Ideas & Objects Draft Specification, its software development capability and associated user communities? The difficulty is that today’s ERP systems do not recognize the existence of the Joint Operating Committee. This stands in contrast to the fact that the JOC is the legal, financial, cultural, communication and operational decision making framework of the industry. Every internal and external process of a producer tacitly recognizes these frameworks. However, the organizational focus has become centered on the compliance and governance frameworks of the royalty, tax and SEC requirements of the producer firm. What the Preliminary Research Report determined, and the Draft Specification implements, is the movement of the compliance and governance frameworks into alignment with the five frameworks of the JOC.

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

Thursday, August 19, 2010

IBM's Global CEO Survey

IBM has published their bi-annual Global CEO Study. Registration is required to download the .pdf, I recommend reviewing the document to gain an understanding of the state of affairs in the global CEO’s mindset.

Oil and gas producers are faced with a difficult situation. As the earth science and engineering disciplines expand. And the volume of technical effort needed for each barrel of oil increases. The scientific human resources available to the producers remains relatively constant. What’s needed is a new division of labor and specialization to increase the volume of throughput of these fixed human resources. This changing environment is, according to the IBM study, being joined with a new variable, complexity.

Using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer becomes a necessity in this complex environment. The JOC being the legal, financial, cultural, communication and operational decision making framework of the industry can deal with this enhanced complexity. When we are required to work with the needs of multiple producers within each and every JOC. Continuing to use generic ERP systems that don’t identify and support the JOC. Introduces unneeded complexity to an already difficult environment. If industry is to meet the market demands for energy, the Joint Operating Committee will need to be supported and identified by the ERP systems that are defined in the Draft Specification. The IBM Study notes.

In our past three global CEO studies, CEOs consistently said that coping with change was their most pressing challenge. In 2010, our conversations identified a new primary challenge: complexity. CEOs told us they operate in a world that is substantially more volatile, uncertain and complex. Many shared the view that incremental changes are no longer sufficient in a world that is operating in fundamentally different ways. Four primary findings arose from our conversations:
The first of these four findings is complexity and the capacity to deal with that it. IBM’s survey seems remarkably candid about the CEO’s capacity to deal with this new complexity.
Today’s complexity is only expected to rise, and more than half of CEOs doubt their ability to manage it.
Innovation will become the means for value creation in the oil and gas industry. Innovating on the basis of the expanding earth science and engineering disciplines. The industries leadership will be derived from those that are able to operate creatively in this scientific and technical environment.
Creativity is the most important leadership quality, according to CEOs. Standouts practice and encourage experimentation and innovation throughout their organizations. Creative leaders expect to make deeper business model changes to realize their strategies. To succeed, they take more calculated risks, find new ideas, and keep innovating in how they lead and communicate.
Third in the IBM study focuses on the customer, the Draft Specification will enable, closer interactions between the producers, vendors, suppliers and communities involved in the industry. IBM’s survey notes the focus of CEO’s is more towards the customer. Oil and gas producers never see their customers however, an expanded capability to deal with those involved in the business of oil and gas is needed.
The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority.
In the fourth finding, IBM focuses on the interactions between partners and suppliers.
Better performers manage complexity on behalf of their organizations, customers and partners. operations and products, and increasing dexterity to change the way they work, access resources and enter markets around the world.
These four conclusions are consistent with the needs of the innovative oil and gas producers. IBM has developed a strong capability in their bi-annual study of CEO’s. I can only assume that personally interviewing 1,500 CEO’s is done at substantial expense. I would question the value that IBM is able to generate from this survey. This paper was published in May 2010 and the volume of discussion that it has generated must be disappointing. I wonder if there will be another report in two years time.

Producers are encouraged to contact me in order to begin their participation in these communities and support our Revenue Model. Those individuals that are interested in joining People, Ideas & Objects can join me here.

Wednesday, August 18, 2010

People, Ideas & Objects - Wish List

Today we provide a list of the independent producers, National Oil Companies (NOC's) and International Oil Companies (IOC's) that People, Ideas & Objects are targeting. It would be ideal to have these twenty five firms use the applications that we are building. If you know, or have access to the decision makers in these firms, please contact me here. The company name and location are provided as are their web addresses.
  • Abu Dhabi National Oil Company                          United Arab Emirates
  • Anadarko Petroleum Corporation                            The Woodlands, Texas
  • Apache Corporation                                                 Houston, Texas
  • BP                                                                            London, England
  • Chesapeake Energy Corporation                             Oklahoma City, Oklahoma
  • Chevron Corporation                                               San Ramon, California 
  • CNOOC Limited                                                     Hong Kong, China
  • ConocoPhillips Company                                        Houston, Texas
  • Devon Energy Corporation                                     Oklahoma City, Oklahoma        
  • ExxonMobil Corporation                                        Irving, Texas
  • Forest Oil Corporation                                            Denver, Colorado
  • Hess Corporation                                                    New York, New York
  • Iraq National Oil Company                                    Baghdad, Iraq
  • Kuwait Petroleum Corporation                               Safat, Kuwait
  • Marathon Oil Corporation                                      Houston, Texas
  • Occidental Petroleum Corporation                         Los Angeles, California
  • Petroleos Mexicanos                                              Mexico
  • Petroleo Brasileiro SA - Petrobras                         Rio de Janeiro
  • PetroChina Company Limited                               Beijing, China
  • Petronas                                                                 Malaysia 
  • Pioneer Natural Resources Company                    Irving, Texas
  • Qatar General Petroleum                                       Doha, Quatar
  • Saudi Arabian Oil Company                                 Dhahran, Saudi Arabia
  • Royal Dutch Shell                                                 The Hague, The Netherlands
  • Total S. A.                                                             Courbevoie, France
In addition to these firms, People, Ideas & Objects would be pleased to include representative firms from the startup oil and gas producer community. Producers are encouraged to contact me here in order to begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here.

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Tuesday, August 17, 2010

Our Revenue Model - Defined

I am pleased to have defined the Revenue Model for People, Ideas & Objects. I have aggregated the material in one knol located here. We now have the justification for producers to support these developments. Definition of the Revenue Model initiates Phase Two of this projects development, the Preliminary Specification. Readers can aggregate all of the posts for Phase Two here.

Producers are encouraged to contact me here in order to begin their participation in these communities.

Monday, August 16, 2010

Oracle vs. Google

Oracle has taken steps to litigate Google’s use of Java on the Android operating system; claiming Google’s use of Java requires payment for the technology. Oracle’s lawsuit seeks to establish that Google’s use violates its patent and copyright. One thing that can be stated about Oracle’s acquisition of Sun Microsystems, is that the adults are now running the show.

Working with Sun Microsystems was frustrating on many different levels. One of the frustrations is there never seemed to be any follow through from the business point of view. They may have built the most advanced technologies, but left the major issues of the business and marketing to chance. Letting the altruistic “community” or “open source” world develop the business.

This statement may appear in contrast to the dedication and commitment of People, Ideas & Objects to its communities. To that I would make the following points. When it comes to open systems, “free” does not mean for nothing. Free or open source systems leave the overall leadership or guidance of the product in the hands of the community. That the community is free to discover the correct direction for the product. People, Ideas & Objects has put the product direction in the hands of the user, producer and Community of Independent Service Providers. The business of how our communities will survive in the long term follows a similar strategy to what Oracle is employing.

In Sun’s “altruistic” management of their communities they left the business aspects of their technologies to find their own way. The community needs to be supported financially. Without the financial resources, there is no sustainable viable long-term community that will survive. Leaving the communities financial resources to the whims of whether Google would pay or not is foolhardy. Now that Oracle is monetizing these Intellectual Property assets, the Java community will prosper.

With that stated, it is important to note that People, Ideas & Objects have budgeted for all of Oracle licenses, including Java. These are being paid on behalf of our users, producers and Community of Independent Service Providers. At no time will users or producers be expected to pay Oracle directly, or be subject to any Oracle litigation with respect to their use of the underlying Java or Oracle technologies used in People, Ideas & Objects software applications.

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Thursday, August 12, 2010

Getting it Right

The Draft Specification provides a clear vision of how the innovative oil and gas producer would be supported by Information Technology systems. By building IT systems that use the industry standard Joint Operating Committee, innovation is facilitated and enabled. The Draft Specification is however, only the beginning and is by no means the final say. It is the beginning of a process that will discover the right solution with the input of users, producers, the Community of Independent Service Providers and others. Only then can we begin to develop the “right” systems for the industry.

Getting it right will be the difficult part of developing these systems. Community based developments are the only possible way of discovering what is “right”. Producers need to realize these are critical and necessary elements of their future systems success. To assume a vision, or technology driven solution from another vendor would require the same user-driven process. Unlike other ERP vendors, we are not selling a solution to users, we are building the user the “right” tools they need to efficiently do their jobs.

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Wednesday, August 11, 2010

McKinsey Ten Technology Trends Part I

McKinsey are once again focusing on the impact that technology will have on organizations. This new article entitled “Clouds, Big Data and Smart Assets: Ten Tech-Enabled Business Trends to Watch” and sub-titled “Advancing technologies and their swift adoption are upending traditional business models. Senior executives need to think strategically about how to prepare their organizations for the challenging new environment.” For the past while I have been closing these blog posts with the comment that management are conflicted and will not make the necessary changes to financially support these developments. Here McKinsey is putting the decision to move to adopt these technologies at the foot of senior executives.

As the worlds premier consulting firm, McKinsey have added substantially to the discussion of applying technology to organizational change.

The ways information technologies are deployed are changing too, as new developments such as virtualization and cloud computing reallocate technology costs and usage patterns while creating new ways for individuals to consume goods and services and for entrepreneurs and enterprises to dream up viable business models.
Again, prospective users of People, Ideas & Objects, and members of the Community of Independent Service Providers will be at the forefront of these major trends.
For senior executives, therefore, merely understanding the ten trends outlined here isn’t enough. They also need to think strategically about how to adapt management and organizational structures to meet these new demands.

1. Distributed co-creation moves into the mainstream.

Recall that we are working to detail “Phase Two” of this project. The purpose of Phase Two is to develop the Preliminary Specification which is proposed to generate a system design consisting of 100 man-years of effort. These developments will be generated from one thousand or more contributors and the entire prospective user community reviewing and influencing the output. A design such as the Preliminary Specification, which of course has not been done before, has also never been possible before.
In the past few years, the ability to organize communities of Web participants to develop, market, and support products and services has moved from the margins of business practice to the mainstream.
Producers need to be a part of this process. Determining the geographical, functional and process scope of the application are part of the Preliminary Specifications deliverable. Ensuring that the specification addresses the producers needs is the responsibility of each producer.

The time for producers to begin their involvement in these communities and developments is now. With the Revenue Model providing significant financial incentives for early participation and the ability to influence the output of these developing communities, delays in a producers participation could be costly.

2. Making the network the organization. 

Using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer is only possible as a result of the advanced networks and Information Technologies. Networks enable and facilitate the interactions between JOC partners and service providers.
We believe that the more porous, networked organizations of the future will need to organize work around critical tasks rather than molding it to constraints imposed by corporate structures.
Management orthodoxies still prevent most companies from leveraging talent beyond full-time employees who are tied to existing organizational structures. But adhering to these orthodoxies limits a company’s ability to tackle increasingly complex challenges. 
As the research that has been conducted here at People, Ideas & Objects shows, the use of the Joint Operating Committee provides a solution to many of the key issues that the industry faces.

3. Collaboration at scale.

To suggest that the oil and gas industry is already engaged in a high level of collaboration would be an understatement. The Joint Operating Committee by its definition is a collaboration. These interactions have been conducted throughout the industry for many years. What is needed is for the Information Technology systems the industry uses to capture these collaborations and embed them within the ERP systems used in the industry. That is what People, Ideas & Objects is working to provide. By adopting the advanced IT infrastructure and enabling the collaborations to be handled through the technology, the industry will be able to scale their activity and innovations to the level necessary to meet the market demands for energy.
Despite such successes, many companies err in the belief that technology by itself will foster increased collaboration. For technology to be effective, organizations first need a better understanding of how knowledge work actually takes place. A good starting point is to map the informal pathways through which information travels, how employees interact, and where wasteful bottlenecks lie.
A process that is part of the work being proposed to be completed in the Preliminary Specification. Recall as well, that tacit knowledge, the understanding of how things get done, can not be captured. It exists only in the minds of the users, Community of Independent Service Providers and employees of the firms involved in oil and gas. What we can do is design and build the tools that enable the people in the industry to use their tacit knowledge.

4. The growing “Internet of Things”.    

McKinsey highlighted their concept of the Internet of Things a few months ago. These concepts were covered in a blog post that ties McKinsey concept to the People, Ideas & Objects Technical Vision.

5. Experimentation and big data.

Experimentation is the way in which innovation in oil and gas will expand the sciences. One of the keys to exploiting the experimentation and “big data” in the industry is the Joint Operating Committees operational decision making framework. When we align these organizational decision making processes to the systems used by the innovative firms, then we will be able to use these new and valuable tools.
Using experimentation and big data as essential components of management decision making requires new capabilities, as well as organizational and cultural change. Most companies are far from accessing all the available data. Some haven’t even mastered the technologies needed to capture and analyze the valuable information they can access.
We will address the remaining McKinsey technology trends in a future blog post. McKinsey close their paper with the following comment.
The pace of technology and business change will only accelerate, and the impact of the trends above will broaden and deepen. For some organizations, they will unlock significant competitive advantages; for others, dealing with the disruption they bring will be a major challenge. Our broad message is that organizations should incorporate an understanding of the trends into their strategic thinking to help identify new market opportunities, invent new ways of doing business, and compete with an ever-growing number of innovative rivals.
Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Tuesday, August 10, 2010

The Budget for Phase Two

Here we step into the truly surreal world of People, Ideas & Objects budgetary needs. The objective of Phase Two is to complete the Preliminary Specification. A task that has been defined as 100 man years of effort. A task that when complete would be a significant step forward for the innovative oil and gas producers. Costing this part of the development is relatively easy. We pay standard rates for contributions of $125.00 U.S. per hour. Therefore 100 man years at 1,760 hours per year totals $22 million. I could identify many other costs involved in supporting these developments, however.

Our revenue model sets an annual rental fee for each calendar year. That fee was set at $1.00 per barrel of oil equivalent for the 2010 year. Penalties are due and payable effective March 31 on any outstanding fee for that year. As of today’s date, each and every producer will be assessed the 300% penalty on their 2010 rental fees. These fees and penalties are to be paid in full by all producers irrespective of when they may join the developments. No participation or use of the software is permitted by any producer until all outstanding fees and penalties, back to January 1, 2010, are paid in full. The incentives are to participate early, and there are no financial benefits in waiting for other producers to pay disproportionately the fees and costs of these developments. Early participation is rewarded with a reduction of 75% of the total potential fees, (penalty avoidance) and greater participation in the definition of the software. (Or the ability to map the software to deal with the producers organization.)

To set a dollar amount to complete the Preliminary Specification is beyond what can be reasonably budgeted or defined. We are therefore proceeding with Phase Two on the basis that as producers join, and pay their required fees and penalties, we will proceed with the further development of the project. A pay as you go basis as producers join the development. The nature of the Preliminary Specification facilitates this stop-and-go type of development.

It is also time to set the fees for 2011. As in 2010, 2011 fees are set at $1.00 per barrel of oil equivalent. This fact alone shows the value proposition of this project. That although the costs of development are high, the costs to an individual producer are not only reasonable, they are a mere shadow of the traditional ERP software costs.

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

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Monday, August 09, 2010

S + B's Big Oil's Big Shift

We have today a remarkable article from Booz & Co’s “Strategy + Business” (S + B). Prospective users of People, Ideas & Objects software applications and members of the Community of Independent Service Providers need to see that the work that they can do at People, Ideas & Object is topical, and hence valuable. This S + B article entitled “Big Oil’s Big Shift” provides an understanding of some of the issues in oil and gas. Many of the points in the article are specifically addressed in the Draft Specification. Although S + B considers the majority of these issues arise as a result of the BP Gulf of Mexico spill, to many, these issues were evident irrespective of the spill.

The targeted market for the People, Ideas & Objects software applications is the entire oil and gas industry. This definition includes start up oil and gas companies, independents, International Oil Companies (IOC’s) and National Oil Companies (NOC’s). All of these firms use the Joint Operating Committee (JOC) systemically throughout their organizations.

Risk has always been inherent in the extraordinarily complex projects that extract oil from the ground or sea. During the past few years, industry trends have added to this risk. The most accessible and productive oil fields, including those in the Middle East and Russia, are now owned and operated solely by national oil companies (NOCs). Leading international oil companies (IOCs) such as BP, ExxonMobil, and Shell — also known as the oil majors — therefore find their access to “easy” reserves rapidly shrinking.
For the reasons noted in the above quotation, People, Ideas & Objects believes the four classes of producers will partner to approach the remaining technically difficult and demanding reserves. Therefore it is imperative that these JOC’s and partnerships are able to deal with any combination of producer classes, in as many geographical areas as necessary. Access to an ERP system that can identify and support these different producers business operations is therefore a necessity.

Supporting the interactions between producers within a JOC is only the beginning. The ability to work closely with the service industries is also a necessity. The Draft Specifications Resource Marketplace module provides the ability for the producers represented in the JOC to deal more closely with service providers in the service industries, communities and contractors. The Draft Specification also provides a new governance model to facilitate these interactions through the Military Command & Control Metaphor. S + B states:
But the oil majors will have to manage their contractors differently, working more closely in teams with business partners that earn their trust over a long period of time, and in some cases taking stakes in third-party providers to better control their performance. This partnership model must be built on interdependence and mutual respect — a significant change from long- standing practices in some parts of the sector. The oil majors will also need to revise their operating models, sorting out a different mix of activities to outsource, and bringing some of the most critical oversight functions back in-house — so they can address quality issues and place employees on the front line to better oversee the growing situational risk in oil drilling.
To make this possible requires management to fall on their sword. As I have noted in each of this blogs recent closings, management are conflicted, and the executives at the producer firms need to make the decisions to financially support these developments.
Perhaps the biggest uncertainty in this new and challenging business environment is the ability of the major oil companies to change as conditions shift measurably. Most large oil companies — including both international oil majors and state-owned NOCs — have rigid management cultures and adversarial, penny- pinching relationships with suppliers and partners. Historically, they have tended to focus on short-term cost cutting without sufficient consideration for collaborative operations that could benefit themselves and their partners.
Lastly, S + B notes that the time for these changes to become effective is now. Prospective users and members of the Community of Independent Service Providers will be the ones at the forefront of these changes.
Many people in the oil industry have foreseen these types of changes, but they haven’t been forced to act. Now they will be. Those who figure out how to move beyond their past practices, troubled contractor relationships, and rigid management structures will lead the next generation in the oil sector — on land, in shallow waters, and in deep and remote locations. The time for these changes could come surprisingly soon. 
Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Friday, August 06, 2010

Our Revenue Model Part VII

People, Ideas & Objects focus is on its users and the business issues that they face. We are not providing “new” technology for technologies sake. With respect to our revenue model, technology has a substantial impact on our product delivery.

Past systems development and integration projects have led to time and monetary black holes. Users have frequently had to adapt to poor or technology focused perspectives of their jobs. These are the issues that users face in the marketplace today.

A key area of People, Ideas & Objects competitive offering is that our software development capabilities are based on the “Agile” development principles. In addition to being user focused, these capabilities provide iterative developments that are substantially more productive then past methodologies. More productive due to the focus on working with the user to solve their systems development needs. Getting the users needs satisfied, not chasing blind bunny trails.

Agile developments affect our revenue model by budgeting for the current years activities. Although our total costs remain high, taken from an annual perspective helps to break down the ominous nature of these developments. A release early and release often schedule also benefits the entire community, leading to further focused iterative developments in the short term. I anticipate the only time users will be working without the assistance of developers is in the development of the Preliminary Specification. While the Preliminary Specification is being developed, our development team will be forming, installing the infrastructure and working with Oracle to become familiar with their Fusion Middleware product offerings. Then the two communities will begin to use and develop the systems based on users priorities.

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

Thursday, August 05, 2010

Our Revenue Model Part VI

Throughout the past few months (here, here and here) we have talked about the risks of becoming blind sleep-walking agents of whomever will feed us. An issue when we are discussing systems development. People, Ideas & Objects Revenue Model shows these risks are real and require a new approach to funding these software developments. It serves no ones interests, People, Ideas & Objects, the Community of Independent Service Providers, Users or Producers to proceed without dealing with this issue. It is best to identify these conflicts and compromising situations now, while the influences are manageable.

Producers are expected to fund the software developments on the basis of their production profile. Rental fees are assessed on all producers starting January 2010. This eliminates the possibility that some producers will pay disproportionate shares of the development costs. All producers will be required to have their rental fees, and penalties, paid in full from January 2010 to the current year in order to access the applications. These methods and penalties eliminate all incentive to delay and avoid financial participation by producer firms.

Financial participation is how the communities are supported and hence able to avoid the trap of becoming blind sleep-walking agents of whoever feeds them. People, Ideas & Objects are user focused developments. The choices that a software development project can prioritize are many. Users are one, technical efficiency another and there are many other possibilities. For users to support the producers focus on its competitive advantages of their asset base, oil and gas leases and earth science and engineering capabilities. Users need to have the software tools and means of production, (the financial resources to build those tools) within their control.

This discussion does not preclude the producers participation in these communities. Producers, on the contrary, are critical elements of the user community. These developments will need their full participation and contribution. What is necessary to proceed is the appropriate “political environment” in which users are able to define, build and use the software tools they need to do their jobs.

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

Wednesday, August 04, 2010

A Quick Break

A quick break from documenting our revenue model to highlight a blog post from our favorite researcher. Professor Richard Langlois’ work has provided a solid foundation for the Draft Specification. In a recent blog post Professor Langlois posted an interesting commentary about the discussion that “might have” taken place at GM in the 1920’s. It’s an entertaining read and is probably based wholly of the facts of the case.

The point of the argument is the change that needs to take place at GM. The “owner” of GM is faced with a new management theory about the role of management in controlling the ways and means of the corporation. “Sloan” who might be Alfred P. Sloan, the CEO of GM during the time that management theory was developed and applied, is interviewed by the owner about these new theories.

We are having this same argument today. Management has ceased to be capable of building value within our organizations. Just as the “owner” of GM had to cede to management, management needs to cede to the market definition. People, Ideas & Objects Draft Specification is the means for management in oil and gas to cede to the marketplace. Professor Langlois’ article is located here.

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

Tuesday, August 03, 2010

Our Revenue Model Part V

Another element of our Revenue Model is the means in which People, Ideas & Objects is capitalized. Traditionally software developers are stand-alone organizations with their own banking, regulatory and venture capital influences. People, Ideas & Objects is taking a project management perspective in providing this software solution to the marketplace. The differences in our capital structure are significant, with our Revenue Model being a critical element in defining and supporting these differences.

The fact of the matter is, by having user based developments defined and supported by various communities. To then have various venture capitalists, or other groups involved in a traditional capital structure, influence whether or not the software was built to specification is too large of a compromise to be viable. Therefore People, Ideas & Objects is funded by its Revenue Model and focused on its users.

To be clear the scope of People, Ideas & Objects is beyond what venture capital groups would be willing to fund. That is to say if the producers are unwilling to invest in this software development, based on the value proposition put forward, no venture capital groups would touch this type of venture. Amortizing the costs of this development over the production profile of the industry is our value proposition. Complicating our capital structure only complicates and compromises the deliver-ability of the software.

To suggest that People, Ideas & Objects can be structured without the traditional involvement of investment capital might be naive for me to consider. However I do know, that it would be naive to suggest that the systems as described in the Draft Specification could be built with the influences of a traditional capital structure. Therefore, it is with that in mind, and to ensure that the Preliminary Specification captures the full scope of the technical and geographical concerns of each subscribing producer. That producers would be wise to support these developments to ensure their concerns remain the appropriate priority of this software development.

One area where our capital structure is not a concern is in the hosting of the application on the cloud computing infrastructure. I have addressed these needs by separating these business concerns from the software development activities. As I have documented in our Hardware Policies & Procedures, the hardware infrastructure is directly managed by the producers themselves. The purpose in structuring the hardware in this fashion is to eliminate the producers regulatory concerns in running their ERP systems, and to ensure that all parties have a vested interest in the infrastructure. In the process of meeting those concerns the business of the firm that hosts the application will have its own capital structure that will not in any way affect or influence the software developments or communities of People, Ideas & Objects.

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