The Preliminary Specification Part CXXXI (R&C Part XXVI)

We now turn to the research area of the Research & Capabilities module in the Preliminary Specification. What we are particularly interested in today is to take control of the financial costs of the innovative activities that are being conducted within the producer firm. A firm of any size would have a variety of projects being conducted. With the volume becoming unmanageable quite quickly if there was no control over the amount spent and the type of activity. There are cost controls that are set in place in the People, Ideas & Objects systems like AFE’s and Work Orders, and these will sponsor most of the research undertaken in the firm. The interface that we are talking about today does not replace those, it only centralizes the information for a clearer understanding of the activity and its funding.

Your firm may become involved in many projects that seek to find new knowledge and information regarding the oil and gas business. Some of these activities may be rather large and will certainly be the focus and will have no difficulty in attracting the attention of the firm. Some however may be small and will be important from the perspective that the information is just as pertinent to the firm, but don’t attract the attention. Nonetheless, this information needs to be included in the day to day of each and every operation of your firm, and as such needs to be documented in the “Capabilities Interface”. How does the firm manage the various projects within a firm to ensure that the money spent and all of the projects are documented within the capabilities of the firm?

Within the Research & Capabilities module we will have the “Research Budget Allocation Interface” that will assist in dealing with the costs of innovation and the volumes of projects the firm is involved in. If an AFE is raised with some element of the costs including the partnership doing some joint research or innovative activity, this activity should be populated in the “Research Budget Allocation Interface”. Or, if a Work Order is raised to conduct some study, that too should be populated into the “Research Budget Allocation Interface”. The purpose of this interface is to ensure that there is no duplication of the research undertaken, if there is then the costs could be saved. It is also to document the ongoing status of the project. And ensure that the results of the project are documented within the “Capabilities Interface” of the Research & Capabilities module.

In general, each organizational arrangement of a firm embodies procedures for resource allocation to particular activities (in our case, innovative activities), and for the efficient use of these resources in the search for new products, new processes, and procedures for improvements in existing routines; however, the specific nature of these procedures differs across firms and sectors. For example, the typical degrees of commitment of resources vary by industry and so do the rates at which learning occurs. I now turn to the interpretation of these phenomena. p. 1135

Although this may appear like a simple interface, in the proper hands it would be a very powerful tool. It would provide a global view of the firms activities in the area of innovation and show the overall progress that the firm was making. It would also show where unrelated innovations might occur. Lastly, and here’s the real kicker, it might show where some opportunities lay. Professor Dosi (1988) states that profit motivated agents must involve both “the perception of some sort of opportunity and an effective set of incentives.” (p. 1135) Professor Dosi introduces the theory of Schmookler (1966) and asked “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities or both”? (p. 1135) Schmookler believed in differing degrees of economic activity derived from the same innovate inputs.

The “Research Budget Allocation Interface” would provide a window on both the “different incentive structures and different opportunities within the producer firm. Making for a powerful tool in terms of guiding the innovative oil and gas producer.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXX (R&C Part XXV)

Continuing on with our innovation review of the Research & Capabilities module of the Preliminary Specification. We note that yesterdays post enabled the innovative oil and gas producer to isolate the innovation activities within one area in their firm. This enabled the various Joint Operating Committees to focus on execution of what was known, which of course included what was proven new and innovative. Today we want to talk about the uncertainty and risk associated with innovative search. Something that I think that most producers are familiar with, however, something that will become more commonplace as the demand for innovation by the producer increases.

What is clear to me is the role that software will play in the enabling of innovation within the oil and gas firm. Throughout the series of these blog posts on the Preliminary Specification it is evident that software plays a critical role in the future oil and gas firm. Software is able to define and support the quantifiable and replicable processes of innovation. For the oil and gas industry to conduct any level of innovation without having the software, as defined here by People, Ideas & Objects, will be leaving the innovations outcome to chance. Such is the nature of software in the 21st century.

Whether it is geological or engineering in nature, the pursuit of these sciences bring to the oil and gas business certain elements of risk and uncertainty. Add to this the commercial nature of the oil and gas business and you have an atmosphere where innovation is for those who can take the heat. Professor Dosi suggest this is the appropriate environment for innovation.

I suggest that, in general, innovative search is characterized by strong uncertainty. This applies, in primis to those phases of technical change that could be called pre-paradigmatic: During these highly exploratory periods one faces a double uncertainty regarding both the practical outcomes of the innovative search and also the scientific and technological principles and the problem-solving procedures on which technological advances could be based. When a technological paradigm is established, it brings with it a reduction of uncertainty, in the sense that it focuses the directions of search and forms the grounds for formatting technological and market expectations more surely. (In this respect, technological trajectories are not only the ex post description of the patterns of technical change, but also, as mentioned, the basis of heuristics asking “where do we go from here?”) p. 1134

Lets be clear, the uncertainty resides in both the scientific and business realms. I am not of the opinion that the two can be separated, as is done in other systems such as SAP. This is maybe why the industry has been poorly served, in my opinion, by the business systems that operate today. They don’t recognize the innovative and science basis of the business and therefore are unable to support an innovative oil and gas industry. If the commodity prices are reallocating the financial resources to fuel innovation. The industry will need to have the systems and procedures installed in order to manage the innovation. Systems such as described here. With the low costs of knowledge and collaboration being the two elements that affect the technological trajectories, having interfaces such as the “Planning & Deployment Interface” of the Research & Capabilities module will be a necessity.

However, even in the case of “normal” technical search (as opposed to the “extraordinary” exploration associated with the quest for new paradigms) strong uncertainty is present. Even when the fundamental knowledge base  and the expected directions of advance are fairly well known, it is still often the case that one must first engage in exploratory research, development, and design before knowing what the outcome will be (what the properties of a new chemical compound will be, what an effective design will look like, etc.) and what some manageable results will cost, or, indeed, whether very useful results will emerge. p. 1135

It is this paragraph that prompted me to start the process of writing the Preliminary Specification series. “Engaging in the exploratory research, development and design of the system before knowing what the outcome will be and what some manageable results will cost, or, indeed, whether very useful results will emerge.” At part 130 we have come a long way and I think we have built some value for the innovative oil and gas producer. It seems we have a long way yet to travel.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXIX (R&C Part XXIV)

Every organization has to deal with the two distinct and differing types of work that need to be done. Simply the two types of work are the need to execute and the need to develop the firms capabilities for the future. These two roles have been separated in the Preliminary Specification with the Knowledge & Learning module, or Joint Operating Committee, concerning itself with execution. And the Research & Capabilities module, or producer firm concerned with developing its capabilities. This division of labor and specialization regarding these two types of work is the topic of discussion in today’s blog post.

Yesterday we noted that innovation was in many ways an engineering approach to problem identification and resolution. We however want to focus these innovation efforts in one area of the firm. Making sure that they are concentrated where they are most useful and the least harmful. And that is the “Planning & Deployment Interface” of the Research & Capabilities module. It is at that location that the focus can be on innovation without the impact affecting the day to day operations of the Joint Operating Committees. Only when an innovation is proven to be worthwhile should it be written up as a new capability in the Capabilities Interface, and therefore populated into the Knowledge & Learning module for use in the day to day of the Joint Operating Committees. Professor Giovanni Dosi notes;

Organizational routines and higher level procedures to alter them in response to environmental changes and / or to failures in performance embody a continuous tension between efforts to improve the capabilities of doing existing things, monitor existing contracts, allocate given resources, on the one hand, and the development of capabilities for doing new things or old things in new ways. This tension is complicated by the intrinsically uncertain nature of innovative activities, notwithstanding their increasing institutionalization within business firms. p. 1133

These support the “how to do things” (the JOC) and “how to improve them” (the producer firm). This dichotomy reflects the challenge of improving the processes and products through trial and error, with heavy emphasis on the error. The ability to accurately predict the success or failure of a new idea contains inherent high risks and hence high rewards. This is one of the constraining factors in implementing innovative thinking, in that no one wants to be proven wrong. Whereas, even if the idea fails to test the theory, the failure may ultimately lead to and may be one of the keys to discovery.

By containing the innovation within the producer firm in the manner that the Research & Capabilities “Planning & Deployment Interface” does. Limits the contamination that might occur if innovation were attempted in the areas where execution is expected. This division of labor is necessary within the oil and gas firm. As we know there are two types of people, those who are able to function best in either of these two environments. Any time these people are asked to operate in the environment that they are not oriented to, they feel uncomfortable and perform poorly.

This maybe shows a contradiction in the People, Ideas & Objects software. We assert that the software aligns the Joint Operating Committees legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks. This claim that the innovation framework is part of the Joint Operating Committee is consistent with the fact that once the producer has proven the innovation is valid, then the Joint Operating Committee is the means in which it is implemented and executed through the “Capabilities Interface”.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXVIII (R&C Part XXIII)

In today’s post I want to reinforce the point that innovation will develop from the interactions and collaborations in the “Planning & Deployment Interface”. We noted that the people assigned to the project would discuss the project and raise any issues that they may have and innovation would stem from these interactions. This process that is captured in the “Planning & Deployment Interface” is how the Preliminary Specification reduces innovation to a defined and replicable process.

Professor Dosi notes that innovation is developed through the interactions between the “capabilities and stimuli” and “broader causes external to the individual industries such as the state of science”. These are captured in the “Planning & Deployment Interface” (capabilities and stimuli) and the Work Order system (state of science) of the Preliminary Specification. As time passes the producer augments their capabilities with the findings from their research undertaken in the various Work Orders that are issued. Capabilities are implemented in the day to day activities that the firm is involved in. It is the interaction within the firm and JOC, and the broader causes that create the innovations. But there’s more.

In today’s post we take the concept of a trajectory, define it, and apply it to oil and gas. The definition of a technological trajectory is the activity of technological process along the economic and technological trade offs defined by a paradigm. Dosi (1988) states “Trade-offs being defined as the compromise, and the technical capabilities that define horsepower, gross takeoff weight, cruise speed, wing load and cruise range in civilian and military aircraft.” People, Ideas & Objects assumes the technical trade-off in oil and gas is accurately reflected in the commodity pricing. Higher commodity prices finance enhanced innovation. These “trade-offs” are very much an engineering approach and therefore I want to reiterate the point that they are “defined as the compromise, and the technical capabilities”.

These trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms. Crucial to the facilitation of these trade-offs is a fundamental component that spurs the change and is usually abundant and available at low costs. For innovation to occur in oil and gas, People, Ideas & Objects would assert that the ability to seek and find knowledge, and to collaborate are two “commodities” that are abundant today. With their inherent low direct costs, knowledge and collaboration are the triggers for a number of technical paradigms which will provide companies with fundamental innovations.

Therefore the ability to collaborate in the “Planning & Deployment Interface” of the Research & Capabilities module is critical to the innovativeness of the producer firm. And by extension, this would also apply to the Joint Operating Committee through the “Planning & Deployment Interface” in the Knowledge & Learning module. Innovation, as it appears in this post, is as much an engineering discipline as it is anything else. That is how we can reduce it to a defined and replicable process.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part CXXVII (R&C Part XXII)

People, Ideas & Objects software application modules enable the producer firms and Joint Operating Committees to focus on their core competitive advantages. These being the land & asset base, and the earth science and engineering capabilities of the innovative oil and gas producer. The Research & Capabilities module of the Preliminary Specification is the key module for the innovative producer to focus on their core competitive advantages. We have been discussing the “Planning & Deployment Interface” of the module and today we want to discuss how the producer maintains the pace of change in the underlying sciences and technologies.

The simple answer to this question is that the producer and particularly the Joint Operating Committee will not have the distraction of the long term acquisition of scientific and engineering research affect the day to day implementation of the knowledge of the firm or Joint Operating Committee. Recall at the beginning of this modules review we defined the time horizons for the Research & Capabilities module, and the Knowledge & Learning module, as the long term and short term respectively. The Research & Capabilities is about the acquisition of capabilities and their documentation, and the Knowledge & Learning is about their implementation. The fact that there is a “Planning & Deployment Interface” in the Research & Capabilities module may lead to some confusion, however, it is there as there are times in which the producer firm needs to implement the capabilities that it has for its sole benefit.

This separation of the time horizon for the Research & Capabilities to take the long term perspective, provides the appropriate mindset for it to focus on the overall development of the earth science and engineering disciplines. The ability of the producer to match the pace of change in the underlying sciences and mapping the necessary changes within the “Capabilities Interface” will communicate the changes through to the organization to the various Joint Operating Committees that need that information on those capabilities. These changes and the communication of the changes to the appropriate people in a timely fashion will provide a means of increased performance for the producer and JOC. Providing a foundation for the producer to further build and implement their competitive advantages of earth science and engineering capabilities.

Restating for clarity purposes. That is how the Research & Capabilities module enables the producers to develop, implement and integrate advanced capabilities within their organization. The research undertaken by the firm should not interrupt the day to day of the operation. However, when the research augments the firms capabilities the “Capabilities Interface” is updated for that information. The capabilities as they are listed in the“Capabilities Interface” will be selected in the “Planning & Deployment Interface”. With these newly augmented capabilities, they will be deployed through to the Knowledge & Learning module, or in the case of work being done by the sole producer the Research & Capabilities module where they can be used and reused by the organization. If the research conducted by the firm is unresolved or undetermined in its conclusion then it would not belong in the “Capabilities Interface”. If it remained unresolved or undetermined then it would indicate that further work was required and therefore remain open in a Work Order for completion or resolution.

Today’s post attempts to clarify the role that Research takes in the Research & Capabilities module and how these advanced capabilities are updated and communicated through to the rest of the organization, which is predominately the Joint Operating Committee. Essentially there are perspectives of the information that need to be enforced. The Research & Capabilities take the long term perspective. The Knowledge & Learning takes the current perspective. Research that is incomplete remains open in a Work Order until resolution. Completed research augments the “Capabilities Interface” which ultimately updates the “Planning & Deployment Interface” in both the producer firm and Joint Operating Committee.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXVI (R&C Part XXI)

We continue on with the “Planning & Deployment Interface” in the Research & Capabilities module of the Preliminary Specification. This interface would also be available to the Joint Operating Committee through the Knowledge & Learning module. Today I want to discuss the general operation of the interface and how users will interact with the information contained within it.

Who ever it is that implements the project through the “Planning & Deployment Interface” will be selecting the various capabilities documents from the “Capabilities Interface”. When they do this they will be able to ensure that the capabilities they select reflect the “final” status necessary for the project. If there is further documentation that needs to take place or more work is needed to advance the state of the capabilities that are selected, these attributes can be added. This would have the effect of keeping the documentation up to the state of the capability within the firm or the Joint Operating Committee. Recipients of the information, once the “Planning & Deployment Interface” was processed, would be able to compare the capabilities information they received with the previous version they viewed, and determine quickly how the capability has changed from that previous version. Then they could assess what impact and consideration that change would have on their portion of the task and if they were to have any issues as a result.

Just as with the selection of the various capabilities the resource selection would have any updated information regarding the capabilities of each individual. If the completion of a course or program, the successful implementation of other capabilities etc would be available to the user who initiates the “Planning & Deployment Interface”. This information could be incredibly detailed and include the contributions that the individual made to the “Lessons Learned Interface” in both the Knowledge & Learning, and Research & Capabilities modules. Their performance reviews from previous tasks and any comments about the role they undertook in previous assignments. This information should be available for in-house staff, resources that are pooled through the various Joint Operating Committees that a firm participates with, any suppliers and vendors or contractors that the firm or JOC may have hired to work on the task.

The timing of the project and its completion are somewhat flexible based on the number of resources that are put on the project. This makes for a bit of a paradox, as if the team gets too large you lose the cohesiveness that the team needs to rely upon. Understanding that the people that are resourced into these tasks are probably assigned to multiple projects, and their participation is somewhat constrained by these limits, the time line may reach beyond what is initially the target.

Lastly the “Planning & Deployment Interface” has been about the known knowns to this point. There are a variety of known unknowns and unknown unknowns. To document these, if possible, is the role of the team members once the project interface has been processed and assigned. Recall that Professor Dosi states “In very general terms, technological innovation involves or is the solution to problems.” Dosi goes on to further define this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Solutions to technological problems involve the use of information derived from experience and formal knowledge. It is the specific and un-codified capabilities, or tacit-ness” as Professor Dosi describes “on the part of the inventors who discover the creative solution.” A section of the interface should be set aside where the team can collaborate on these points and provide some innovative solutions for the producer or JOC.

It is therefore asked specifically, how can the knowledge, information and capability of oil and gas firms solve the technical and scientific problems of the future? How can a firm more effectively employ its capability to solve problems and facilitate the discovery of new problems and creation of their solutions? I think the development of the “Planning & Deployment Interface” as described here would provide the producer and Joint Operating Committee with these sought after abilities.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXV (R&C Part XX)

If all that we were to do with the capabilities aspect of the Research & Capabilities module of the Preliminary Specification. Was to document the capabilities as in the “Capabilities Interface” then we would be wasting a lot of people’s time. The purpose in documenting the capabilities is so that we can deploy them, and that brings in the “Planning & Deployment Interface” which is the topic of discussion in today’s post.

Ideally I see the ability of a firm to deploy their capabilities as a key competitive advantage. The organization of that competitive advantage will be the focus of the management of the firm. It should also be noted that there is a similar “Planning & Deployment Interface” in the Knowledge & Learning module for the Joint Operating Committee. The analogy that I would like to use and develop is directly applicable to the game of American football. Where the coach can call in a play and the team is able to execute that play based on their known capabilities, roll and skills on the team. I want to draw a direct analogy for the person who plans and calls on the capabilities of the firm or JOC in the “Planning & Deployment Interface”.

First we need to bring in the Military Command & Control Metaphor and understand that the role of the individual, as designated in that structure becomes a critical part of the planning and deployment of the firm or JOC’s capabilities. There can be only one Quarter Back and you need many Down Lineman. The filling of the various roles in order to take the actions that are needed is as important as the capabilities themselves. Please review the Military Command & Control Metaphor if you have recently started reading this blog. The MCCM imposes a chain of command across the multiple producers represented in the JOC, or firm and enables them to operate the pooled resources of these firms.

The “Planning & Deployment Interface” will take the three critical aspects of the firm / JOC and arrange them within a web like interface for the user to develop the actions they desire. The three critical aspects are the people represented in the MCCM, the capabilities and the time frame. Having selected the personnel that you want to execute the action that you have in mind, their available time becomes known to the interface from each individuals calendar. Selecting the capabilities from the Research & Capabilities, or Knowledge & Learning, module is then drawn into the interface. From there the user is able to “process” the information and based on the variables given determine when the work would be able to be completed. Then they may select additional resources to fill deficiencies in areas where the capabilities suggest they need more resources, conduct more studies to determine certain unknowns or proceed with the project.

Upon proceeding with the project the people who were selected by the user in the “Planning & Deployment Interface” are given the job to do. They are provided with an understanding of what and how and who will be involved in completing the project. Not that it should be a simple matter of execution, but they should at this time have everything provided within the “package” they receive from the “Planning & Deployment Interface”. That package should be comprehensive and detailed such that it is all that they need to be able to focus on the successful completion of the task. This is how I see the interface operating in the Research & Capabilities module.

The quality of the documentation of the capabilities will be the determining factor in how successful the project will be. If the detail contained in the “Capabilities Interface” is of rich media, detailed and provides the user with a good understanding of what is required then the communication from what is expected and what is understood is not at variance. The people will be able to see clearly what it is that the project is about and how they are expected to complete the task.

The innovative and capable oil and gas producer is in need of the ability to document and deploy their capabilities in an efficient and effective manner. Here is a way in which the deployment is planned and executed with an understanding or “meeting of the minds” based on the quality of the documentation in the “Capabilities Interface”. It being not just a repository of data that might be used some day by some one. But a living source of quality information in which the producer or JOC depends on to make sure that the execution of their projects are successful.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part CXXIV (R&C Part XIX)

Today I want to take a look at Professor Giovanni Dosi’s “key factors” in the context of the scenario that we used recently during our review of the Partnership Accounting module. Recall that we had a number of producers who were joining together through the Work Order to participate in an engineering study. This was discussed in the Partnership Accounting module to highlight the manner in which it eliminated the logistical accounting difficulties that impede the development of these working groups. Today I want to discuss how the efforts of that working group are added to the capabilities of the producer and are managed in the Research & Capabilities module of the Preliminary Specification.

Upon completion of the working group the producer firm will have a unit of knowledge that has been developed from the efforts of the group. Professor Carliss Baldwin provides us with some clarity here with her “knowledge begets capabilities, and capabilities beget action” comment. What is needed is for the producer to have a central repository for the knowledge that is accumulated through the various working groups and other “key factors” in which they acquire that knowledge. This will be called the Capabilities Interface in the Research & Capabilities module and will detail the source of the knowledge, the key factor, how it was acquired, and what it involves will be captured within a wiki styled interface. This interface is also sorted by geological zone and populated to the Knowledge & Learning module for the Joint Operating Committee, based on what geological zones they produce from. Organizing a firms and Joint Operating Committees capabilities is the beginning of developing, deploying and effectively managing them.

Within any module of the People, Ideas & Objects application the user will be able to right click their mouse and select from a sub-menu of actions. These actions will include the ability to begin a Work Order, raise an AFE, prepare a Joint Venture Agreement etc. If the user can take action on the capabilities listed within the “Capabilities Interface” then we have achieved the process that Professor Baldwin states is necessary. Having this information centralized for the producer, and the specific information for the Joint Operating Committee helps to concentrate the knowledge within one location within the firm. There will be little confusion as to where to find the answer to a specific question. When the user finds what they are looking for, the detail of the knowledge or capability should be specific enough as to define a process as to how it is implemented. Understanding that knowledge is never static, the ability to update the information with lessons learned would be part of the users responsibility. Recall this update from lessons learned is also done for the Joint Operating Committee in the Knowledge & Learning module.

The ability to annotate and reference the material within the wiki would make this more usable. However, with the tools that are available today, such as search, make the information more valuable. What is truly valuable is the types of tools that will be available tomorrow. We are beginning to see some of these tools enter the consumer space with the iPhone’s SIRI virtual assistant. The first step however will be to acquire the data and make it actionable through the ERP system of People, Ideas & Objects. Then we will be able to add these tools easily as they become available in the future.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXIII (R&C Part XVIII)

In today’s post we want to document the last of the key factors that Professor Giovanni Dosi states are necessary to support innovation. And then begin a discussion on these key factors and how they are implemented in the Research & Capabilities module of the Preliminary Specification.

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

Additional issues include the conditions controlling occupational and geographical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulation, tax codes, patent and trademark laws and public procurement.)

Its only logical that innovation will spring from advanced markets with labor mobility, legal protection and capital markets. Its one thing to have these facilities provided, its another to have them aligned within the organization. With People, Ideas & Objects we are aligning the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee with the compliance and governance frameworks of the hierarchy. This alignment permits the producer firm and the Joint Operating Committee to attain greater speed, innovation and accountability as a result.

What these key factors reflect is that the innovative oil and gas producer must first of all be capable. Innovation leverages the capabilities of the service industry, the producer marketplace and the greater market makeup. For the producer to attain their highest level of capabilities is the objective of the Research & Capabilities module. Each producer will be able to attain their own specific level of capabilities, and that level will be dependent on these key factors. Not all producers are built the same. The ability therefore to achieve state of the art capabilities and highly innovative practices are not something that are at risk in terms of being “copied” by other producers. Therefore a producers willingness to participate in the collaborative environment created in the Research & Capabilities module would not risk any proprietary competitive advantage. On the contrary, based on these key factors, non-participation would limit the competitive advantage.

This environment is the polar opposite of the manner in which the industry operates today. Certainly there are high levels of joint ventures in operation, however, those are designed to mitigate financial risk more then anything else. And I am not suggesting a different posture be taken in terms of the risk profile of the industry. Only that a more open collaborative earth science and engineering level of discussion and participation is necessary for the industry to move to the next level of performance. One that enables the key factors that have been discussed in these last three posts, interact with the highly aligned and innovative oil and gas producer.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXII (R&C Part XVII)

Yesterday we discussed the need to have the service and oil & gas industries develop their overall capabilities in order for the producer to be able to advance theirs. That these industry wide capabilities have an enabling or constraining effect on each of the individual producers own ability to develop their capabilities, and hence innovations. Today we want to discuss the other aspects of how the producers capabilities are enhanced, and the various elements within the Research & Capabilities module of the Preliminary Specification that enable these to develop.

The second key factor that Professor Giovanni Dosi defines as necessary is as follows.

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

• 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.

Again these only make sense in terms of being critical to enabling the capabilities of the producer firm. The question becomes is how does the Research & Capabilities module and the Preliminary Specification specifically deal with these key factors to enhance innovation?

The first key factor that I want to address is the “supply of technical capabilities, skills, engineers etc.” That raising the quantity and quality of the earth science and engineering technical resources of the industry is possibly one of the three top issues of the industry. How does the Research & Capabilities module specifically increase the supply of these resources? As we have stated here many times the need to rely on the standard economic tools of an enhanced division of labor and specialization are the keys to solving this problem.

If we look at the way the industry is structured today, with each producer building the capabilities needed to address every possible contingency within their organization. The overbuilding of capabilities is the result and this surplus capacity is left unused and unusable. Each producer pursuing the same strategy leaves a large surplus capacity that is unused and unusable on an industry wide basis. The pooling concept that People, Ideas & Objects has developed within the Preliminary Specification. Where producers of a Joint Operating Committee are able to pool their technical resources to meet the properties demands. Eliminates the overbuilding of capacities in each of the producer firms, and enables the producers to deploy any surplus capacity.

That’s the first element of the division of labor and specialization that is inherent in the Preliminary Specification. The second element deals directly with the ability to organize the technical resources in a manner that deals with how the “bread and butter” geology and engineering is done in the industry. With a dedicated software development capability such as that which is People, Ideas & Objects competitive offering, the ability to organize new service based offerings to meet the demands of the industries bread and butter earth science and engineering demands would now be possible. The expansion of the division of labor and specialization will therefore increase the throughput of the industry from the same volume of resources, and also enhance the quality of the resources. As we have stated many times here at People, Ideas & Objects, software will define and support the future division of labor and specialization.

Regarding the “facilities for the communication of knowledge” as a key factor of innovation. The Research & Capabilities and the Knowledge & Learning modules are collaborative information systems that are “industry-wide” in their implementation. A review of the many interfaces that were mentioned in yesterday’s post shows that the development and sharing of knowledge, which are critical for the development of the individual producers capabilities and innovativeness, are systemic throughout this module.

Lastly I would ask the user community if we need to develop an interface in the Research & Capabilities module that allows the producer to interact with the academic and research areas of the earth science and engineering disciplines. It would seem to me to be a worthwhile addition however, the user community may have some specific ideas on what should be included.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXXI (R&C Part XVI)

It’s only reasonable that the producer firm is going to approach the operation of some technically difficult task with the appropriate capabilities. Innovation requires that the capabilities of the producer be the base on which the innovations can leverage. What Professor Dosi has defined in his research is the key factors that innovation requires. Over the next few days we will discuss these key factors and how they are integrated within the Research & Capabilities and other modules of the Preliminary Specification.

One housekeeping duty is to note that there is a “Capabilities & Stimuli” interface in the Petroleum Lease Marketplace module. This documents the contractual obligations that the producer is required to meet in terms of commitments to the various Joint Operating Committees that the producer is a participant in. And to leverage the working interest partners capabilities that are likewise legally committed. This interface is placed in the Petroleum Lease Marketplace module to document the legal obligations that are contractually defined. This interface should also be recreated in the Research & Capabilities module.

In today’s post we will deal with the first of the three key factors of innovation, Professor Dosi notes:

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 complete.

What you are capable of is wholly dependent on what has been purposely developed within your firm. These capabilities have developed over time and are able to be deployed repeatedly. As time passes further capabilities are developed and the firm becomes more capable through a variety of different means. The ability of the firm to develop these capabilities is limited by what the oil and gas service industry is capable of providing. If they have only x number of rigs available, then only so much work will be done. And if the rigs are only able to drill shallow wells then the science of the producer will be constrained by the capabilities of the service industry. Furthermore, if the producer is a state of the art earth science and engineering wonder in a sea of producers who are barely able to successfully drill shallow wells, then the state of the art producer is reduced to the same level of the others. The marketplace of the producers in terms of their technical resources and their capabilities have an enabling and constraining limit on what the producer is capable of. Lastly innovation is leveraged from this base.

The question therefore becomes how do we broaden the base of not only the producer but the service and oil & gas industries. Recall how the Research & Capabilities module has a "Ideas Marketplace" blog like interface where members of the industries can post ideas of products and services that might be of interest to the producer firms. Producers may then act to support these ideas with funding and support to develop the idea into a product or service to augment their capabilities. Recall the "Supplier Collaborative Interface" in the Resource Marketplace module that enables the industry as a whole to benefit from the lessons learned by each producer. The "Gap Filing interface" where the producer can anonymously publish where they see gaps in the service industries offerings. Enabling the service providers to prepare new products and services based on a further defined division of labor and specialization. Or how the information within the Research & Capabilities interface is organized on the basis of geological zone so that only those pertinent zones are populated to the individual Joint Operating Committees through the Knowledge & Learning module.

Recently in the Partnership Accounting module we discussed the accounting attributes of the Work Order system in forming working groups amongst industry participants. These could be informal working groups formed to study some geology or engineering situation among interested producers. The ability to strike these groups, participate in them and develop further capabilities as a result of these studies is a critical aspect of how the producers will develop their capabilities. Since the costs and the results are shared the industry as a whole advances. Leaving the producer open to further potential innovations. I see this as an area that will explode in terms of activity, if, the accounting logistics and bureaucratic nightmare that they create can be dealt with in the manner that the Partnership Accounting module does.

We will continue tomorrow with further discussion of these points.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXX (R&C Part XV)

Now we begin our third pass through the Research & Capabilities module of the Preliminary Specification. This will focus on innovation which involves the capabilities of the firm. In the fourth pass through the Preliminary Specification we will be focusing on capabilities. The Research & Capabilities application module is unique in that it provides the producer firm with the ability to document, develop, and deploy their earth science and engineering capabilities. We will be briefly touching on some of the capabilities areas in this the third pass, and will do a deep dive in the fourth.

It is through Professor Giovanni Dosi’s paper “Sources, Procedures and Microeconomic Effects of Innovation” that we will view this module, and if you have the time it might be worthwhile to review the Research & Capabilities module as background for these blog posts.

A couple of things that jump out at me in the Research & Capabilities module are the division of labor between computers and humans. Formulating ideas, making decisions and collaborating are the activities that are captured in this module. Leaving the mundane transaction and data management tasks to the computers. This I think an appropriate division of labor, I wonder at times what SAP’s thinking is on this. Another aspect that caught my eye was Professor Richard Langlois comment that we are “moving the knowledge to those with the decision rights” as being the primary process that the module captures. And lastly, that a user can right click at any time within the module and initiate any standard ERP type of action on anything in the module. This being an extension of Professor Carliss Baldwins research that notes “knowledge begets capabilities and capabilities beget actions”.

To the topic of innovation, Professor Dosi’s article discusses the role of innovation in the market economy and assumes companies in a free market are willing to invest in science and technologies to advance the competitive nature of their product offering or internal processes. The investment in science and technologies is with the implicit expectation of a return on these investments, but also, to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competition. Professor Dosi note:

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

We discussed only a few days ago that the Accounting Voucher would enable the producer to charge the various joint accounts with the costs of their technical resources with the implicit assumption that they would generate a return on the investment in the firms capabilities. We also discussed the differences between what is acceptable practice today (with overhead allowances) and the different positions that some might take on the topic. However, I think Professor Dosi’s point here has to be taken as the key criteria as to the direction the industry takes on the issue. You are investing to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competitions. The ability to sustain the state of the art oil and gas capabilities on the basis of what a producer earns from oil and gas production is a direct result of those capabilities, however, shouldn’t the costs of those capabilities earn a return above and beyond what the oil and gas production provides?

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXIX (AV Part XI)

One area that has been difficult for the oil and gas producer to deal with is the volatile energy prices. With the costs of production and reserve replacement increasing and the reserve depletion on such a rapid pace, the decline in energy prices can have a material effect on the value captured from a field. With every producer producing at capacity, this risk of price declines comes into play more frequently then maybe needs to be realized. This blog post asks the question, what if, there was agreement in the Petroleum Lease Marketplace and implementation in the Accounting Vouchers Material Balance Report of the Preliminary Specification, to limit the production at certain thresholds based on predetermined commodity prices?

We can accurately tell what the costs of reserves and production costs are and there are many times when these exceed the prices that are received in the marketplace. The North American natural gas marketplace is a very good example of this situation. Selling at a loss may fuel the short term cash flow situation however, it as at the long term expense of reserve replacements. In a highly innovative oil and gas marketplace, the costs of innovation are being funded by the commodity prices. However, these costs may exceed the temporary fluctuations in the market prices for the commodities. Is it wise for the producer to continue to produce at capacity?

What if the agreement that governs the Joint Operating Committee has the partnership agreeing to a reduction of production by 15% when the price of the commodity drops below x value. And what if the agreement also reduces the production by 25% when the production prices drop below y value. These situations would help to mitigate the loss of earnings on the reserves and not materially affect the cash flow of the operation. The global implications of many producers implementing this type of price based production profile would put a floor on the commodity prices. A floor based on the marginal costs of reserve replacement.

The implementation of the production decreases would be triggered in the Petroleum Lease Marketplace and signaled to the Material Balance Report. One area that we have not yet discussed in detail is the field data capture that is implicit in the Material Balance Report. This signal from the Petroleum Lease Marketplace module would then choke back the production to the 85% threshold when the prices realized are below the level set in the trigger.

Selling at a loss is a fools game. The political issues surrounding the choking back of production are something that might make some wince. However, the reality is that the costs of production and reserve replacement are escalating and the volatility in the commodity prices only seems to becoming more prevalent. With shale gas costs in North America being as high as they are, who would contemplate producing at these prices? In many ways we are our own worst enemies.

This scenario of price driven production adjustments will be part of the Preliminary Specification. If producers decide to use it, it will be there choice. I think it is necessary with the situation in the energy market that the producer has some protection of their investment from the volatility and political influences of the commodity marketplace.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part CXVIII (AV Part X)

The interactions between the Accounting Voucher and the Partnership Accounting modules of the Preliminary Specification are naturally quite significant. They both being accounting modules, it is natural that they have high levels of integration. The Accounting Voucher is unique in that it brings to the producer the ability to design transactions and the Material Balance Report. These are not innovations that the producer will use to become more innovative but are provided to ensure that the innovative producers processes are actively defined and supported through out the People, Ideas & Objects application modules.  When the business is a science, as it is in oil and gas, it would be in the producers interest to remain open and flexible in both its scientific and business approach. The Accounting Voucher and Partnership Accounting modules provide that organizational flexibility.

The manner in which these two modules operate is as follows. The Accounting Voucher captures the transactions. Partnership Accounting reports on the transactions. Accounting Vouchers remain open for one accounting period and are subject to the same closing process that is familiar and traditional in the accounting world.

We noted in the Partnership Accounting module how the Work Order enabled the producer with the ability to form and participate in working groups. This flexibility is what is sought in these accounting modules. Elimination of the bureaucratic inertia that impedes these activities today makes these modules critical to a producers innovation as much as the Research & Capabilities or Knowledge & Learning modules do.

Professor Dosi (1988) states that profit motivated agents must involve both “the perception of some sort of opportunity and an effective set of incentives.” (p. 1135) Professor Dosi introduces the theory of Schmookler (1966) and asked “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities or both”? (p. 1135) Schmookler believed in differing degrees of economic activity derived from the same innovate inputs. It is People, Ideas & Objects assertion that the “different incentive structures” and “different opportunities” are facilitated or constrained by the administrative ease in which the producer operates.

The same can be stated for the Material Balance Report. If the producer is confident that the deal that was conceived is accurately captured in the Accounting Voucher. And the operation is therefore also reporting a substantial profit. Then they know that their innovations are working, their systems are working and the alignment of the legal, financial, operational decision making, cultural, communication, innovation, strategic, compliance and governance frameworks is achieved.

This will be the last post on the Accounting Voucher during our third pass. We will be skipping over the Security & Access Control module as it is not directly involved in the producers innovation. Recall that our third pass is focused on innovation and therefore we will be moving to the Research & Capabilities module of the Preliminary 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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part CXVII (AV Part IX)

Yesterday’s post detailed the ability for a producer to offset the costs of their capabilities and their development to the various Joint Operating Committees that they participate in. With the expected increase in the earth science and engineering effort in each barrel of oil produced. And the difficulty in increasing the supply of geologists and engineers to meet the demands of the business. The pooling concept has been developed within the People, Ideas & Objects application to deal with the supply and demand of these finite technical resources. It is within the Accounting Voucher of the Preliminary Specification that the automation of the charging for these resources, as detailed in yesterday’s post, enables the producer to earn a return on their investment in their earth science and engineering capabilities.

It comes down to the question of what business is it that the producer is in. Are they in the business of generating profits from producing oil and gas, or are they in the business of generating profits from providing geologists and engineers to the operations they have an interest in? If we look at the competitive advantages of the producer it is the land and asset base, and the earth science and engineering capabilities that they apply to that asset base. Clearly both production and capabilities development are within the scope of the business of the oil and gas producer. And to a large extent the costing of the technical resources in the manner mentioned in yesterdays post is not fundamentally different from what occurs today. In today’s market, the operator is provided with “overhead allowances” for the capture of some of these costs. The difference from today and what is proposed here is that the elimination of the concept of an operator by “pooling” the technical resources of the Joint Operating Committee participants to acquire the necessary capabilities.

To take this opportunity to charge the costs of the capabilities of the producer firm and earn a return on investment may be the issue that some people will have with the concept. In a world where the market for engineers and geologists is highly competitive. And you as a producer are assessed on your performance based on Revenue Per Employee. The acquisition of additional technical resources is a difficult process that has implications to your firm. The ability to offset the costs of your technical resources helps to mitigate these issues in the short term. This is the purpose for enabling the direct billing of technical resources to the joint account in the Accounting Voucher.

When we get to the review of the Research & Capabilities and Knowledge & Learning modules during this innovation review. We will see the development of these capabilities from an innovative point of view will take on a different perspective. The ability to capture this development of a firms technical resources as an investment, and have them as a source of revenue here in the Accounting Voucher is what I want to establish with today’s and yesterday’s posts. Looking at the development of the producer, it is somewhat of a paradox as to which is developed first, the land base or the capabilities. With the ability to have the capabilities generate their own revenue stream the paradox is resolved in the short term, in that capabilities development is expected to earn a return on investment.

Some may suggest that these costs offset the production revenues of the Joint Operating Committee that would have gone to the producer anyways. And that may be true. However, in a world where the demands for the technical resources are expected to be as significant as some suggest. The need to deal with the problem on a wholesale basis, as People, Ideas & Objects pooling concept does, is a requirement, and secondly, the assumption that everyone else will develop their technical capabilities might be false.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part CXVI (AV Part VIII)

We return to the Accounting Voucher module of the Preliminary Specification for our focus on innovation. This module works closely with the Partnership Accounting module to capture the accounting for the Joint Operating Committee and the producer firm. If you recall we are introducing many new and innovative concepts to the Accounting Voucher, concepts such as the design of transactions, the comprehensive nature of the Material Balance Report, and the ability for all of the producers within a Joint Operating Committee to post to an open Accounting Voucher.

In this third pass through the Preliminary Specification we are focusing on innovation. And when we get to the Research & Capabilities and Knowledge & Learning modules we will be focusing heavily on the capabilities elements of those modules. With that understanding, and the knowledge that the producer firm is building a substantial technical earth science and engineering capability, we turn to Professor Giovanni Dosi.

Professor Dosi’s paper discusses the role of innovation in the market economy and assumes companies in a free market are willing to invest in science and technologies to advance the competitive nature of their product offering or internal processes. The key aspects of Professor Dosi’s theories that make them directly applicable to oil and gas are the innovation theories application to earth science and engineering disciplines. These disciplines are key to the capability and success of oil and gas firms search, and production of, hydrocarbons. The investment in science and technologies is with the implicit expectation of a return on these investments, but also, to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competition. Professor Dosi notes:

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

The producer firm is committing to developing their capabilities with the understanding that they advance their competitive advantages, and, earn a return on their investment. How within the People, Ideas & Objects application does the producer earn a return on their investment in their capabilities? The most obvious answer is through direct charges to the joint account. That is to say that the people (representing the producers capabilities) who are pooled into a Joint Operating Committee, have been assigned a role within the Military Command & Control Metaphor and who’s costs are captured in the Partnership Accounting module are recovering a “revenue” stream for the producers capabilities.

The question then becomes what is the charge for the individual during the time that they are working in the Joint Operating Committee. It will be easy to determine the hours that are worked in the various JOC’s of the technical resources. Whether through the Work Order or through other means, the ability to capture the time spent will be available and accurate in the People, Ideas & Objects system. The hourly rate would need to include a number of factors. The skills of the individual. The technical resources of the producer firm that is at the disposal of the individual. And also a measure of the level of innovativeness of the producer firm, say something like Revenue Per Employee that reflects the overall productivity of the firm.

Once they have factored these elements in they could then assign an hourly rate to each individual in their firm and ensure that so many hours of their year are charged to the various joint accounts that they have an interest in. With the advanced level of systems automation that we are using, we can charge the joint accounts based on the hours worked each month based on the charge out rate of each individual in the producer firm.

The net result of this is that the revenues should exceed the costs and the producer will have captured a return on their investment in the capabilities that they have developed within their firm. To proceed on any other basis would be, I think, unreasonable.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part CXV (PA Part XIX)

In this third pass through the Partnership Accounting module of the Preliminary Specification we have focused on just the elements that support innovation within the oil and gas producer. That should not take away from the comprehensive nature of the module. Today I want to extend that understanding of innovativeness across the whole spectrum of functionality and process management within the module. And provide a sense of where the focus for the user community should reside.

If we go back to the Draft Specifications list of standard reporting output for the Partnership Accounting module we come up with a good understanding of the overall scope of the module. The community of course is uninhibited or constrained in any way by any list or requirement that I have stated here in the Preliminary or Draft Specifications. They are encouraged to add what they feel are necessary functionality, processes or modules.

Where I see a lot of changes occurring is in the level of activity that happens between producers. As the capabilities of the producers are developed, the need to interact will expand and the systems the firms use will need to support these transactions. The ability to support them will have to be done on an “as they happen” basis, as the historical accounting approach will be too costly and disruptive. The need to have the interfaces to the People, Ideas & Objects application modules will need to be developed with the user in mind. Think about iPhone and iPad type of applications and interfaces that are part of the Partnership Accounting module.

Innovation is the objective that we are seeking to develop in the producer firm. It is the difficult and costly element that will drive the organizations focus. The accounting and systems need to be a critical part of that, and be active in supporting this innovation in the Partnership Accounting and other modules.

The development of the Community of Independent Service Providers is also an area that should be kept in mind when considering these software developments requirements in the Preliminary Specification. Is there a better way to develop the interface for a service provider for conducting production accounting on a wholesale basis? These types of opportunities are also the key considerations of the user community during the development of the Preliminary Specification. The division of labor and specialization are keys to a more productive oil and gas industry. And software will both enable and constrain the division of labor and specialization.

Tomorrow we will begin our third pass through the related Accounting Voucher module.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXIV (PA Part XVIII)

The complexity of the relationships within the Joint Operating Committees has to be captured and accounted for in the Partnership Accounting module of the Preliminary Specification. Whether we are talking about the various forms of contribution that a producer may make to the joint account, or how they may participate in a working group, the bureaucratic machinations of the accounting for these transactions can’t stand in the way of innovativeness of the producers.

The freedom to participate is inhibited by the fact that the business arrangements are difficult to capture and account for. What is needed is the ability to develop software that captures the substance of the manner in which the contributions are being made, and then the manner in which they are accounted for. That is the purpose of the Partnership Accounting module, to support the innovative oil and gas producer in the innovative actions they need to participate in. Once again Professor Giovanni Dosi points out specifically the need for the business aspects to support the technical aspects of the business.

Internalization and routinization in the face of the uncertainty and complexity of the innovative process also point to the importance of particular organizational arrangements for the success or failure of individual innovative attempts. This is what was found by the SAPPHO Project (cf. Science Policy Research Unit 1972 and Rothwell et al. 1974), possibly the most extensive investigation of the sources of commercial success or failure of innovation: Institutional traits, both internal to the firm - such as the nature of the organizational arrangements between technical and commercial people, or the hierarchical authority within the innovating firm - and between a firm and its external environment - such as good communication channels with users, universities, and so on - turn out to be very important. Moreover, it has been argued (Pavitt 1986; Robert Wilson, Peter Ashton and Thomas Egan 1984) that, for given incentives and innovative opportunities, the various forms of internal corporate organization (U form versus M form centralized versus decentralized, etc.) affect innovation and commercial success positively or negatively, according to the particular nature of each technological paradigm and its stage of development. p. 1135

Capturing the context of the deals made in both the Joint Operating Committee and working groups as described here in the Preliminary Specification can’t be done on an historical basis. What is needed is for the software to be sophisticated enough for the deal makers to be using while formulating the deal, to capture the substance of the deal, so that it will be used to allocate the costs and charge their accounting systems for these costs when they are incurred. Then and only then will the accountants have a chance of keeping up with the speed and innovativeness of the industry as it is contemplated here.

This is the necessary part of the People, Ideas & Objects software development team and most importantly, the user community. It won’t be too difficult to capture the multiple and myriad ways in which a deal can be formulated. The algorithm will be complex but with time and money it can certainly be done. The real difficult aspect of making this critical part of the Partnership Accounting module work is the user interface. Having the ability of the user to intuitively use the module to capture their understanding of their part of the deal, capture it in the People, Ideas & Objects system and account for it on that basis. That is what is necessary to make this innovation possible.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.