Where we are at, Phase-Two Begins

The sabbatical is over and its time to get back to work. It’s been a restful and worthwhile break to recharge the batteries to make the crucial transition from phase one of the project to begin the second phase. It’s therefore best to start off with a quick summary of where we are at in terms of how we left things before the sabbatical.

Most importantly is the Draft Specification which was published in July 2008 and forms the basis or foundation of the second phase of our software developments, the Preliminary Specification. This eleven module system description defines what a producer firms systems would look like when we use the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. It is radically different and provides an overall vision of how producers would manage their assets in the most profitable manner. The Draft Specification is available for review on two pages located here.

From the period of time between August 2008 to May of 2010 we undertook a detailed discussion of how and what the Draft Specifications impact would have on an oil and gas concern. Taking issues and opportunities of the day and applying them to the specification. Providing real life testing and understanding of these ideas. We also had the opportunity to take McKinsey’s and others research and apply it to further broaden the overall understanding of the Draft Specification. These blog posts can be sourced through the archive during the period noted, or through the McKinsey label.

Although we continue to promote the Draft Specification from time to time we began to move the project forward with some specific deliverables in 2010. During the period June - August 2010 we developed the Phase Two proposal that forms the framework of the second phase of the work that is now ahead of us. These blog posts can be aggregated by selecting the Phase-Two label in the blog. One important difference between what is stated in that period and now is that I will be clearer on the budget requirements of the Preliminary Specification. So stay tuned for that.

Lastly during the time frame of August 2010 to January 2011, or the beginning of our sabbatical, we reviewed the key points in the Preliminary Research report. Our special emphasis was on Professor Giovanni Dosi’s paper “Sources, Procedures, and Microeconomic Effects of Innovation”. These blog posts can be aggregated by selecting the “Review” or “Dosi” label. I highly recommend reviewing this work thoroughly. Professor Dosi’s work is very pertinent and applicable to using the Joint Operating Committee in the manner that the Draft Specification suggests. In fact the Draft Specification is designed using the research of Dosi’s and many others research and therefore makes the understanding of his work critical.

It is on that note that we say so long to the heavy emphasis on research. I expect that the primary focus on research will fade from this blogs pages. We are moving to a commercial forum and one that focuses on building software. Research has provided us with a broad base of understanding and a foundation of almost 800,000 words of how the Joint Operating Committee builds real value for the innovative oil and gas producer. Now we turn to a new a focus that builds on that foundation. We are now focused on building the software that makes that value real. Value that recognizes that it its not just ownership of the oil and gas assets; but also access to the most innovative software to provide the most profitable means of oil and gas operation.

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. Email me here if you need an invite.

Those Annoying Fees Are Due.

A key element of People, Ideas & Objects value proposition is that the costs associated with software development are allocated across our population of subscribing producers. The more producers we have subscribing to our development, the greater the allocation of these development costs across a larger denominator. Our cost - plus method of charging the producers the costs associated with development, and allocating these costs across a large base of producers provides a substantial value proposition in comparison to the traditional means of billing by software vendors.

Another element of our value proposition is that with a large subscriber base we quickly acquire the resources necessary to approach engineering the appropriate software solutions. When the traditional software vendors are developing one-off solutions they are usually unable to allocate the costs beyond one or two subscribing customers, therefore the costs to engineer the solutions quickly exceed what those customers can tolerate. With People, Ideas & Objects value proposition, our ability to engineer the solution to the ideal level on behalf of our entire subscribing base is easily attained as no one individual producer is asked to disproportionately incur intolerable engineering costs, and all of our subscribing producers are able to acquire highly engineered solutions.

The following is a quick summary of the fees and penalties that are due for producers subscribing to People, Ideas & Objects.

2010

Recall that 2010 was the year in which we began our policies of assessing our fees and penalties. Effective 2010 all subscribing producers, irrespective of the date in which they subscribe, are required to pay all fees and penalties from January 1, 2010 forward. 2010 was also the year in which we implemented our policy of assessing penalties on any outstanding fees after March 31 of the assessment year. These penalties are assessed at 300% of the years fees. (Please see our recent post entitled Free Riders and the Participation Bonus)

Therefore producers wishing to subscribe to People, Ideas & Objects are subject to the 2010 $1.00 fee and $3.00 penalty per barrel of oil equivalent per day of production.

2011

Fees for 2011 have been determined to be $1.00 per barrel of oil equivalent production.

Therefore to become a fully subscribed producer member of People, Ideas & Objects the producer would take their daily production volume of x boe / day x $5.00 (total fees and penalties for 2010 and 2011) = producers subscription fees.

It is now time for producers to act. Review of our Revenue Model will inform producers how they can participate in the development of People, Ideas & Objects Preliminary Specification. Producers can contact me here for further information, or to begin the process of their participation.

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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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.

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Scope of the Preliminary Specification

We have therefore established January 1, 2011 as the commencement of the development of the Preliminary Specification. What does this involve and what are the objectives of the specification? This post will provide a general outline of the work that will be done during 2011.

Firstly we should establish what a “collaboration” is. In many instances the terms collaboration and consensus get confused. I see these as two distinctly separate terms. What I feel happens is a group will define what a consensus is by determining what the majority will agree to. On the other hand, a collaboration is the hard work of determining what is the optimal solution. Collaboration is a process that achieves breakthroughs and discoveries.

The Preliminary Specification is a consensus of the producer community. It is important to have the input of subscribing producers to define the overall scope of the application. If a producer has operations in the Gulf of Mexico, extensive NGL or heavy oil operations they should ensure that the Preliminary Specification’s scope captures those requirements. If they don’t actively participate to define their needs within the application, at the commencement of this development, it will be significantly more difficult to assert their needs in subsequent iterations of the development.

The Preliminary Specification is a collaboration of the end user community. These are the people who will need to use the application. They are the best resource to define the application process and functionality that they need to do their jobs. It is their tacit knowledge that is and will be employed in the oil and gas industry. Tacit knowledge can not be captured and employed by computer systems. What users can do is build the software tools they need to deploy their tacit knowledge. Collaborating to define and discover what tools would work best is therefore their responsibility. No one else can do this critical definition for the user community.

The Preliminary Specification is a collaboration of the Community of Independent Service Providers (CISP). This group of individuals, teams and firms are the glue that holds the developers and the users together. They are resources that provide the users with the delivery of their software tools.

The Preliminary Specification has been previously defined as 100 People years of effort. The population of users, producers and CISP participants in making up this 100 People years is very large. In the several thousands. The larger the participation, the better the output of the specification will be. In essence we are trying to capture as many of the ideas that are available in the various communities, the needs of the producers, determining which are the breakthrough discoveries and settling on a scope of functionality of the application. A quotation of Version One defines this as breadth of the application.

To effectively deal with scope on an Agile project, specifications must be considered in two dimensions: breadth first and then depth. It is essential that we understand the breadth of what we want to build early in the project. Dealing with the breadth of the solution helps the team understand scope and cost and will facilitate estimating and release planning. The breadth of a project begins to frame the boundaries of the project and helps to manage the organization’s expectations. Looking at the breadth of the requirements is a much smaller investment of time and resources than dealing with the entire depth. The details are most likely to evolve as we progress through the project so defining them early has less value.

The two constraints placed on the Preliminary Specification are they must use the Draft Specification as it's starting point and be focused exclusively on the business of oil and gas. Technology is not part of this specifications deliverable. The depth of the application will be determined during the Detailed Specification.

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 has been proven, this reorganization could 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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Chandler The Role of Business in the ...

Professor Alfred D. Chandler published a document entitled "The Role of Business in the United States: A Historical Survey" in the Winter 1969 version of "Perspectives on Business" from MIT Press. This paper chronicles how the economy developed. I find it surprising in many of the things that are not generally known or understood about the role and function of finance in the early years.

For a paper on the historical role of business in America to provide a solid foundation for discussions of the present and future, it must examine a number of questions: Who were the American businessmen? How did they come to go into business? How were they trained? How broad was their outlook? And, of even more importance, what did they do? How did they carry out the basic economic functions of production, distribution, transportation, and finance? How was the work of these businessmen coordinated so that the American economic system operated as an integrated whole? Finally, how did these men and the system within which they worked adapt to fundamental changes in population, to the opening of new lands, resources, and markets, and to technological developments that transformed markets, sources of supply, and means of production and distribution? The answers to these questions, as limited as they may be, should help to make more understandable the present activities and future capabilities of American business. p. 23

I want to highlight the role of what has to be the key determinant in the development of the economy, the Merchant. Specifically, the role of the merchants in financing business development and trade. This enabled much of the development of the corporation, the separation of ownership and management and the speed, scope and scale of the structured hierarchy. Without the critical skills and capital of the merchants, it is doubtful that the hierarchy would have been able to rise to such prominence.

The colonial merchant was an all-purpose, non-specialized man of business. He was a wholesaler and a retailer, an importer and an exporter. In association with other merchants he built and owned the ships that carried goods to and from his town. He financed and insured the transportation and distribution of these goods. At the same time, he provided the funds needed by the planter and the artisan to finance the production of crops and goods. The merchant, operating on local, inter-regional, and international levels, adapted the economy to the relatively small population and technological changes of the day and to shifts in supply and demand resulting from international tensions. p. 24

and

Only a few of the great landowners and leading lawyers knew the larger world. It was the colonial merchants who, allied with lawyers from the seaport towns and with the Virginia planters, encouraged the Revolution, brought about the ratification of the Constitution, and then set up the new government in the last decade of the eighteenth century. p. 24

The Merchants were the key to the development of the economy. In this paper Chandler documents how effectively the Merchants expanded economic activity to the point where the scale and scope was beyond theirs and their extended families reach. How this eventually created the "Manager" and developed the concept of the separation of management and ownership. It is noted the professionalism of the managers and their development during this time. Management replacing direct ownership as the means to effective management. Yet what is clear in the history, and is plainly clear today, is that management have no financial stake in the firm. Interestingly Chandler notes this is not the first time that this has been an issue.

In many ways, the managers were more of an elite than the earlier businessmen had been. Even though this elite was based on performance rather than birth and played a critically constructive role in building and operating the world's most productive economy, its existence seemed to violate basic American democratic values. At the same time, its control of the central sector of the American economy challenged powerful economic concepts about the efficacy of a free market. After 1930, the managers came to share some of their economic power with others, particularly the federal government. Nevertheless, they were forced to do so not because of ideological reasons, but because they failed by themselves to assure the coordination and growth of the economy, the basic activities they had undertaken after 1900. p. 35

In 2010 it is clear the division between ownership and management is as great as it ever has been. Management hold the reigns of power and have advanced their concerns over the shareholders. Leaving the ownership generally dissatisfied. Government, particularly the Obama administration, believes they are the natural progression to takeover from management. I think networks, and particularly People, Ideas & Objects and the Community of Independent Service Providers provide the best alternative to the innovative oil and gas producer.

The Depression clearly demonstrated that the corporation managers alone were unable to provide the coordination and adaptation necessary to sustain a complex, highly differentiated, mass production, mass-distribution economy. The coming of the Depression itself reflected population and technological developments. p. 35

I think the eight hundred pound Gorilla in the room is that management have no stake in this game. If failure occurs then shareholders and debtors will pay the price and management will fend for themselves. Whether it is at another firm, or their vested pension that provides them with their continuity, either is satisfactory. The point is that with no skin in the game, what is keeping management at the table.?

They have proven unwilling to fund People, Ideas & Objects software developments, why do the hard work when a new pension statement has just arrived? We are foolish to expect anything more of management, they are there for the good times and their history shows they are incapable of bridging critical economic changes such as what we are facing today.

Just as the Merchants began the whole process. Applying their capital and skills to the economy. Future development of our economy is in the investor and shareholder hands once again. Society dictates, and I hear it in the Tea Party movement, that this process be renewed.

Our appeal should be based on these eight "Focused on" priorities and values of how better the oil and gas industry and its operations could be handled. They may not initially be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are. If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Chandler on Decision Making

In the March 1973 Journal of Economic History Professor Alfred D. Chandler presented a paper entitled "Decision Making and Modern Institutional Change". A few days ago I commented on the velocity of productivity in the volumes and speed of decision making and idea generation in oil and gas. The origins of these comments were the Google video of CEO Eric Schmidt, and the term velocity as used by teams of Agile-Scrum developers. Velocity is the key metric in determining the through put of the software development team. In this paper Chandler also discusses the concept of velocity and attributes it as the key success of the large firms over the past 100 years. I think many of the points that Chandler makes can also be applied today. A time when the challenges to the large firm are significant. Chandler notes;

The potential of the new means of transportation and communications could only be fully realized through new methods of organization. The operation of the railroad and telegraph systems required the operation of a complex managerial structure to assure steady and continuing flows of information and orders essential to guide the movement of trains, traffic and messages. Because of greater speed and fewer trans-shipments, a railroad car could make in two days the round trip that required a stage coach or canal boat a week. By careful coordination of flow within and between the large railroad enterprises, the time involved decreased still more. As the rate of traffic flow increased, so did output per worker and per unit of capital and equipment used in the movement of goods. p. 6

The Information & Communication Technology Revolution (ICTR) is assumed to be beginning its long process of impacting businesses now. Although these technologies have facilitated enhanced speed in all organizations, new methods of organization are necessary to enable greater speed and velocity. The movement to new methods of organization has been resisted by the current management, as it conflicts with their established power. People, Ideas & Objects has had no success in convincing management of the need to change to the JOC. Theirs is a static world where, as we will begin to see in the current annual report season, is commencing on a period where their speed and innovativeness are inadequate to meet even elementary financial performance. Specifically I think that higher operating and capital costs will be directly attributable to their lack of speed. And their large balances of indebtedness are long term constraints to their viability. Particularly during times of interest rate increases. All that management have done is fully valued their debt and obligations. I have asserted on this blog before, as the financial performance of the current bureaucracies deteriorate, the innovative producer supported by the People, Ideas & Objects software application and the Community of Independent Service Providers will enable the innovative producer to purchase many of these assets from these bureaucracies. But the software has to exist first.

The briefest of historical sketches of the rise of large scale managerial enterprise in American transportation's, communications, distribution and production, emphasize that the economies of scale within the firm resulted far more from speed then size. It was not the size of an enterprise but the velocity of throughput that permitted economies that lowered costs and increased output per worker and per machine and so provided the classic, competitive advantage. Speed brought size, but size in no sense brought speed. p. 9

Clearly the bureaucracies size and lack of increasing velocity are the issues. Such were the advantages of size and speed that Chandler notes;

Once such economies were attained, the large managerial, multi-unit enterprise rarely disappeared. p. 10

Therefore the problem can simply be rectified by increasing their size and speed. If only things were so simple.

Increased velocity in turn intensified the need for complex managerial organization. p. 11

In a dynamic, connected and virtual world it is easy to focus on the problem of today. Our focus however needs to be on larger issues as we have little that we can do to influence performance by focusing on the short term. This change in culture from optimizing today to innovative will not be an easy process. It however begins by the investor / shareholder seizing the industry from management through the process mentioned above. The process of seizing the control of the industry begins by building the necessary software and communities that will ultimately support the innovative producer.

The senior executives at the top attempted to focus their energies on the critical decisions concerning present and future allocation of resources. p. 11

As we reflect on the performance of the industry over the past year. We see the economy beginning to show signs of real life. One that may be as a result of the enhanced efficiencies and innovativeness brought about by the ICTR . Demand for energy will begin to grow again. Energy prices will respond, and the reallocation of the financial resources dedicated to innovation will increase. We should look back on the history of the hierarchy and realize two things. One is the significant contribution it has made to society in terms of our quality of life.

The dominance of our society by this and other large-scale organizations is one characteristic of the twentieth-century that distinguishes it from all others. The enormously increased speed and volume of economic activity is another. p. 15

And secondly realize that we stand on the shoulders of several generations of giants. If the bureaucracy degrades as a result of the forces aligned against it. How far will society degrade. We need to act to begin to develop the new organizational methods necessary to carry us for the foreseeable future.

Our appeal should be based on these eight "Focused on" priorities and values of how better the oil and gas industry and its operations could be handled. They may not initially be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are. If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Lazonick on Chandler Part IV

Part IV of what has turned out to be a phenomenal paper, reviews Lazonick's "Part 3. Social Conditions of Innovative Enterprise" of "The Chandlerian Corporation and the theory of innovative enterprise". I indicated in an earlier post that the Joint Operating Committee and the application of the Draft Specification were consistent with Lazonick's Strategy, Organization and Finance; which make up his framework for "Social Conditions of the Innovative Enterprise". In this post I want to go into more detail as to how I see these three social conditions provide value for the investor / shareholder. Value in using the JOC through application of the People, Ideas & Objects Draft Specification and Community of Independent Service Providers (CISP).

Before we begin I want to make a quick note to highlight one attribute of the Draft Specification. In order to make the Draft Specification functional we needed to develop an alternative governance structure to replace the hierarchy. That is the Military Command & Control Metaphor (MCCM) used at the Joint Operating Committee to give the necessary structure for it to operate. Without this structure it would be difficult to implement any plans or to enable any actions. This MCCM replacement structure adopts a pooling of the resources available from the various producers represented at the JOC. This pooling of resources is further augmented by the objective (ie not affiliated with any one producer) and JOC focused pool of CISP that the JOC hires directly. All of these resources adopt a military styled command structure based on their education, experience, skills and the chain of command determined by the JOC representatives.

3. Social conditions of innovative enterprise

Lazonick provides in his social conditions a clarity in how the system is workable when strategy, organization and finance are aligned.

The theory of innovative enterprise provides a framework for analyzing the roles of strategy, organization, and finance in generating the competitive advantage of one firm over another within the same industry (see e.g., Carpenter et al., 2003; Lazonick and Prencipe, 2005; Lazonick, 2009a: ch. 2).... As I have shown in this work [for syntheses, see Lazonick (2003, 2004b, 2007)], the theory of innovative enterprise permits us to identify three social conditions that may support the transformation of strategy, organization, and finance into innovation across the industries and constituent enterprises that characterize the national economy. Even in the highly globalized world of the 21st century, the social conditions of innovative enterprise differ across nations characterized by distinctive economic institutions for governing the allocation of resources, employing labor, and financing investment. pp. 14 - 15

In the Preliminary Research Report it was noted financial interest at the JOC drove consensus and collaborative decision making. People, Ideas & Objects appeal is to the investor / shareholder in oil and gas. It is these individuals that we are attempting to provide an alternate organizational structure, the JOC supported by this software development capability and community, to manage their assets. I therefore see the participants who are sitting at the JOC the individuals that directly own the working interest or their designated proxy. With that in mind lets begin the review of Lazonick's social conditions of the innovative enterprise.

If the shareholder / investor is the one sitting at the JOC, representing their interests, based on the culture of the industry, they are endowed with the operational decision making authority for that property. These decision rights are critical to Lazonick's first social condition.

In the framework that I have developed, the social condition that can transform strategy into innovation is strategic control: a set of relations that gives decision-makers the power to allocate the firm’s resources to confront the technological, market, and competitive uncertainties that are inherent in the innovation process. For innovation to occur, those who occupy strategic decision-making positions must have both the abilities and incentives to allocate resources to innovative investment strategies. Their abilities to do so will depend on their knowledge of how the current innovative capabilities of the organization over which they exercise allocative control can be enhanced by strategic investments in new, typically complementary, capabilities. Their incentives to do so will depend on the alignment of their personal interests with the interests of the business organization in attaining and sustaining its competitive advantage. p. 15

In reading this I am struck by what Professor Carlota Perez said about "new" organizational constructs being "Common-Sense". Those with a reasonable understanding of oil and gas operations can see the nature of this ownership / control mechanism at work in the strategic control social condition. When a JOC is formed it is by agreement. Included within the agreement is an operating procedure with the means spelled out as to the decision making authority under the agreement for that JOC. Therefore the use of the JOC meets the first social condition necessary in Lazonick's framework.

This second social condition is not present in the oil and gas industry today. There is substantial conflict between the JOC and the bureaucracy. The bureaucracy, which represents the operator, conducts all or most of the operations as if it were their own. The JOC is relegated to a few ceremonious meetings to make decisions based on the agreement in hand. It is then the bureaucracy that essentially implements the will of the JOC within its annual operations. There is no pooling of human resources and the non-operator is relegated to spectator status for the better part of the year. This situation can not be sustained when the operators are required to develop their internal capabilities to deal with all of the individual possibilities and contingencies within the areas they operate in. There are not enough engineers and geologists available to meet the needs of each producer building redundant silo's of capabilities that may or may not be required. The Resource Marketplace Module deals with breaking down these silo's and the development of the means to dynamically pool the resources of the producers represented in the JOC. These resources are further augmented by the CISP and the service industries to develop this dynamic capability.

The social condition that can transform organization into innovation is organizational integration: a set of relations that creates incentives for people to apply their skills and efforts to organizational objectives. The need for organizational integration derives from the developmental complexity of the innovation process—that is, the need for organizational learning—combined with the imperative to secure high levels of utilization of innovative investments if the high fixed costs of these developmental investments are to be transformed into low unit costs. Modes of compensation (in the forms of promotion, remuneration, and benefits) are important instruments for integrating individuals into the organization. To generate innovation, a mode of compensation cannot simply manage the labor market by attracting and retaining employees. It must be part of a reward system that manages the learning processes that are the essence of innovation; the compensation system must motivate employees as individuals to engage in collective learning. This collective learning, moreover,cumulates over time, thus necessitating the sustained commitment of financial resources to keep the learning organization intact. p. 15

The Financial Marketplace Module looks to move the financial structure of the industry away from supporting the corporate entity and moves it to directly support the JOC. This implies that, within reason, the property represented would source their bank debt from one bank for all producers. This could be extended to include each working interest owner securitizing the asset on an exchange. (Please see the Compliance & Governance Module for further information on this point.) The point being that strategy and finance need to be aligned. Producers at the JOC are currently conflicted by varying degrees of financial flexibility based on the size of the producer and its financial situation. The size of the producer has no bearing on the innovativeness at the JOC or its upside. A small producer may be more inclined to drag its feet if left to fund their commitments through general bank assignments on the corporation, whereas, the bank representing the JOC could be better positioned to mitigate its risks through a general assignment of the specific JOC.

The social condition that can transform finance into innovation is financial commitment: a set of relations that ensures the allocation of funds to sustain the cumulative innovation process until it generates financial returns. What is often called “patient” capital enables the capabilities that derive from collective learning to cumulate over time, notwithstanding the inherent uncertainty that the innovation process entails. Strategic control over internal revenues is a critical form of financial commitment, but such “inside capital” must often be supplemented by external sources of finance such as stock issues, bond issues, or bank debt that, in different times and places, may be more or less committed to sustaining the innovation process. pp. 15 - 16

Lazonick is talking about more then what the Financial Marketplace Module of the Draft Specification considers. The financing mechanisms are one of the key areas where additional value, flexibility and innovativeness can be generated from. But what Lazonick notes here as the social condition is the role of the CISP . These people are not affiliated with one individual supplier or one individual producer. They are independent as their name reflects. They have not been constrained by the Exxon or Schlumberger way. And I am not stating that those firms ways are wrong, the CISP is independent of that. Their focus is on the needs of the JOC and the ability to be innovative and support this software development capability as well as the JOC.

In yesterday's post I offered the "Velocity of Productivity" as a new concept to consider for the future. This is the domain of the CISP in terms of ensuring that the value of the industry, the JOC and the software development are all consistent with social conditions that Lazonick correctly asserts are necessary for Strategy, Organization and Finance to be in alignment.

Lastly as I indicated in the first part of this post the Military Command & Control Metaphor is a critical concept in making these "Social Conditions for the Innovative Enterprise" work. Without structure there will be failure. What is needed is a means to extend the structure of the JOC to include the producers represented, the CISP and the suppliers who make the industry function. The broadening of the scope outside of the current "operator-only" methodology is a necessity due to the resource constraints, particularly the engineering and earth science resources of an innovative oil and gas industry. What we need to do is introduce a different means of organization in order to expand the potential output of the oil and gas industry. The MCCM and Lazonicks "Framework for Social Conditions of the Innovative Enterprise" are the means to do that.

People, Ideas & Objects and the Community of Independent Service Providers need to see this financial commitment from the oil and gas investor and shareholder. We are offering a more effective manner in which to manage the oil and gas resources of the producer firm, and this effectiveness will not come about without the commitment's from these producers. Management have proven time and again that they will not fund these developments. There's is a situation that compromises the separation of management and ownership to the benefit of management. Why would they support an effective means of managing oil and gas assets.

Our appeal should be based on these eight "Focused on" priorities and values of how better the oil and gas industry and its operations could be handled. They may not initially be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are. If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Focused on the Issue

Continuing on with a series of quick blog posts that summarize the 30 compelling reasons we developed during our 2010 budget drive. Compelling reasons for getting involved in People, Ideas & Objects. I have summarized these 30 reasons into eight "Focused on" summaries that started with the post Focused on the Energy Business. This will be our third post, with our second post, Focused on the User, being published yesterday.

The Issue

Since 2005 global oil and gas production has stalled. Energy prices reflect this fact, and are reallocating the financial resources to the innovative oil and gas producer. Each barrel of oil produced requires progressively more earth science and engineering effort. This trend in the increase in the scientific and engineering effort for each barrel will continue. Science and engineering is where the value in the industry is generated, and the capacity of the bureaucracy to keep up has failed.

We live in advanced societies where man has leveraged mechanical effort through the use of energy. We recently confirmed the calculation that each barrel of oil offsets 18,000 man hours of effort. This can also be restated by saying that we stand on the shoulders of several generations of giants. Energy is the lifeblood of our global economy. Any challenge in sourcing the required energy has a direct impact on our quality of life, and society will have far to fall if there is an energy shortfall. The bureaucracy in oil and gas assures us that there is plenty of oil, yet our production remains the same as in 2005. Resolution of this conflict may be as simple as management suggest, or it may be tragic.

Through research reflected in the Preliminary Research Report, the Draft Specification and this blog. The industry standard Joint Operating Committee (JOC) provides the innovative oil and gas producer with the necessary organizational construct to identify and support innovation in the earth science and engineering disciplines. The JOC includes the legal, financial, cultural, communication and operational decision making frameworks of the global oil and gas industry. Building the systems to define and support these activities is the necessary first step in beginning our approach to solve this issue.

Exxon has estimated that to meet the demand for energy, capital investments of $20 trillion will be required over the next 20 years. I believe we should approach a problem of this scope by first organizing ourselves. Otherwise we risk throwing money at the problem and getting no where. I believe we are beginning to see the beginnings of this issue affect the performance of the producers. Reporting that reserves and production continue to decline is the start of this process. After realizing the increases in prices for oil and gas, why would declines in production and reserves occur? Recently in the Calgary Herald, the Canadian National Energy Board predicts that Alberta's natural gas production will decline by 34% in the next two years. Clearly our organizations are failing society, and as the conflict reflected in our 2010 budget drive shows, bureaucrats are in control.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Proof

Our 2010 budget campaign is now over. We've raised the total of $0.00 and documented over 30 compelling reasons that People, Ideas & Objects should be funded. Yesterday we saw that management have many alternatives at their disposal, all of which distract their focus from the issues facing the business. Shell's CIO accurately reflecting how lost management has become.

I feel the evidence that we have provided in this web-log, over just the past 90 days, proves that management will never fund these developments. Their situation is comfortable, therefore People, Ideas & Objects shares many of the same complaints about management as the directors, investors and shareholders in oil and gas.

It is therefore in our best interests that we cultivate this community and establish a long-term funding, and mutually beneficial, relationship with directors, investors and shareholders. The stated purpose of doing so should be to eliminate the type of self-serving management and bureaucracy that is the source of our mutual difficulties.

Getting back to the business of the oil and gas business is an urgent requirement of society. Management feel they have the capabilities to raise the global production profile at will and that is their stated position. I believe there is money to be made in the energy business and the need to organize ourselves for the task at hand is our first priority. Organizing ourselves in the manner as defined in the vision of the Draft Specification.

So with this post, I want to formally recognize the director, investor and shareholder as forming a community that we represent here at People, Ideas & Objects. With this post I will aggregate all the discussions around the label Ownership-Community. As we focus on the process of building the User, Community of Independent Service Provider and Ownership-Communities for the remainder of 2010. It is with regret that we can not fund any developments until we have sourced adequate funding, however, there is still much that can be done.

It is reasonable to ask if this is a new form of economic organization? Yes, it most definitely is. And therefore, we begin to look at the works of Alfred D. Chandler. With the hope and understanding of determining new research and ideas from a review of corporate history and its development, we will continue onwards.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Focused on the Energy Business

The purpose of this post is to highlight the differences between the systems that People, Ideas & Objects proposes to provide in the Draft Specification, and what management are providing the producer firms today. With this being the end of our 2010 budget drive, the contrast is surprising.

Within the Draft Specification we set out to build an application that deals with the issues that the innovative oil and gas producer is facing. Keeping up with the demands in the earth science and engineering disciplines. Basing the system on the Joint Operating Committee and designed to facilitate a greater level of speed and innovativeness within all producers. Providing the producer with the most profitable means of operations.

Today, I stumbled upon this McKinsey article that documents the state of affairs in Royal Dutch Shell. The interview is with Mr. Alan Matula, Executive Vice-President and CIO. I think it is best to read the article first, and then watch the video below to try and get a feel for what Mr. Matula is talking about.



What planet is Mr. Matula from? Is he serious? And if so, what industry is he in? My god, I can't believe that Shell would even hire this guy, unless of course, they all speak that way!

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Last day of our 2010 budget drive.

There is little time remaining in which we could raise any money in our first quarter 2010 budget drive. The consequences of not having our budget funded are many. The two critical consequences are the probable loss of one years time in which to bring the application to market. The second is the imposition of penalties to all producers for the 2010 fiscal year. These penalties are set at 300% of the fee, and therefore, effective April 1, 2010 the total costs of participation to each producer will be $4.00 per barrel of oil per day of production.

There may be a period of time in September 2010 when we can fund our budget, but based on the effectiveness of this past quarters budget drive, the probability of that remains low. Realistically, 2011 will be the earliest time in which we have the opportunities present themselves as they are here today.

What will happen in 2010 will therefore be of limited value in terms of progress. Development of the community is one of the limited options we have, limited in the sense that the community needs to see the producers support these developments. Participation by the community will be crippled without the producers financial resources.

In terms of postings to this blog, I don't see any reason why the pace and frequency can't continue. There is much to discuss in representing the variety of technology and research topics that we follow, and how the Draft Specification could fit into the industry. Besides writing on these topics is too much fun to quit.

So here is to a less pressured 2010. We did what we could and the producers don't share our concerns. Should they change their minds they'll know where to find us. To those who are regular readers, please stay tuned as the desire to continue with this project is strong. Just because the producers don't share our concerns, doesn't mean they won't come around. After all, we have now proven to the investors and shareholders that the bureaucracy won't fund this software.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Perez, The New Technologies Part V

Our concluding post of our review of Professor Carlota Perez' "The New Technologies: An Integrated View". To contrast this post to yesterday's discussion around our funding failure, reflects the surreal nature of the work here. There is much academic support, unanimous agreement with people who know enough about oil and gas, and general understanding that People, Ideas & Objects is the direction we should move, yet no funding. Professor Perez has based her research on the major economic events that have occurred in the last number of centuries. That her paper was first published in 1986 shows the quality and validity of her research.

RETHINKING THE ROUTE TO DEVELOPMENT

Contained within this paper's conclusion is a caution that once these paths have been taken, the need to sustain the development (of People, Ideas & Objects) is critical. A concern that is valid in any industry, but one where the oil and gas industry has been notoriously poor at. There are remnants of so many piecemeal initiatives littering the landscape, some in the form of commercial enterprises, that one should check their sanity in getting involved in this project.

What we do know is that the bureaucracy is on life support and will soon pass into history. Our problem is to ensure that alternatives are in place before the corpse begins to atrophy. In 2010 we stand on the shoulders of several generations of giants and could find the fall from these lofty heights painful. At 270 billion man days per day, we have far to fall and much to lose. We also know that Information Technology (IT) has been constrained and is now mature enough to be able to carry much more organizational weight. That is to say, society is demanding things be done in the easier manner provided by technology.

From what has been said no productive sector is immune to the influence of the new technologies. This implies that, into the future, most of existing plant is technically and organizationally obsolete. And with this, so are the notions and guidelines that resulted in its establishment. Hence the productive structure of each country from one end to the other must be reexamined under the light of the new conditions. p. 42

And that re-examination is here at People, Ideas & Objects, based on the Joint Operating Committee and represented in the vision of the Draft Specification. With the five year time frame noted in which to develop the Draft Specification, and five years being a minimum number of years for management to come up with their own specification, what alternatives do we have. As each day passes we lose time in which the final solution is brought to market, because of a lack of funds!

To affirm this begs the question of how to go about it. The only answer is that the new routes will necessarily result from a massive process of social creativity. The important thing is to point out that the space within which to invent them is new and different. Here we shall limit ourselves to indicating some general guidelines stemming from the features of the new paradigm. These can serve as a starting point to rethink development strategies. p. 42

Management will no doubt want their solution to be in the top-down manner that they are used to. People, Ideas & Objects is a user based, bottom-up solution based on the vision of the Draft Specification. Taping into this "social creativity" is what the technologies provide, we would be foolish not to want to incorporate it. It is reasonable to predict this approach will provide a quantum increase in productivity and efficiency.

In this context it is important to note that the new forms of organization can, by themselves and with a minimum of new equipment, significantly raise efficiency. Moreover, experience acquired after reorganization is the best source of criteria for selecting the most adequate and truly indispensable new equipment to incorporate. This has been shown again and again in Japanese plants and is in agreement with the results of a study conducted in the UK. The reorganization route can serve to revitalize and modernize certain sections of the existing industrial basis with modest investment costs. p. 43

What we are unable to do in this project, is to rally the financial support of the management. Information Technology investments have proven controversial in oil and gas, what has / needs to change to fulfill these possibilities?

We have already referred to the key role of technological dynamism in the new paradigm and the intermediary function performed by software and systems engineering firms in bringing the adaptive potential to practice. This means that taking true advantage of the new model requires a leap unto the new technologies. p. 44

And for the really tough part...

What does have to be understood is that the effort has to be sustained and concentrated. Once in the race, technological dynamism has to be maintained at the rhythm of the international frontier. This, in countries lacking a risk capital market and an adequate network of industrial services, requires a strong policy of promotion and support, capable of stimulating research and innovation and providing appropriate externalities. p. 45

I can only assume based on our 2010 funding failure, that a sustained effort can only be achieved by a chronic fear brought about by the failure of the bureaucracies. I say that on the basis of the amount of work we have to do, and the amount of time before a solution is needed by the market.

Nonetheless we believe that preparation for the future cannot be postponed. Once a world upswing is unleashed, development prospects for each country will depend not only on the level of development attained in the previous wave but also in having been capable, early enough, of creating the conditions for taking best advantage of the new. p. 46

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 30 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Ten Days To Go

With ten days left in our 2010 budget drive, we have eight business days to secure our funding. To date we have received no support, no indication, no commitments, nothing. One of the objectives of this funding drive is to provide evidence that the management will never support these developments. They are too conflicted, and are in no hurry to establish any competition for their services. With all that we have discussed here in the past three months, it's surprising that this project doesn't generate the support it needs. I'm obviously unaware of the great systems management has planned or are using today.

With the abysmal amount of money that is spent in oil and gas on software development, we can assure ourselves that nothing is being done. With the lack of financial resources being committed to this project, it is clear that expectations of another group lining up to "break their pick" are surreal. You truly reap what you sow.

Another aspect of management is the clear lack of concern for the markets demand for energy. Management will provide what they can when they can, and the rest is left up to the someone else. It's not their problem. This hands off approach to the marketplace displays managements lack of concern outside of their domain. That may have been the way that business was done in the past. If we all think that way today, then all of our futures will be more uncertain.

With the lack of funding, there is no lack of desire for me to bring this solution to the marketplace. I will agree the probability and possibility have become remote, if not improbable. I will continue to do what I can. Management wins in this scenario, and they will state they see the future in a different light to the one described in this blog. Without the clarity of an issue, being in the news, being on the mindset of everyone, it is difficult to rally the troops to resolve it. Which means of course, we will have to wait for that day when failure does occur.

Another aspect of this budget drive is to establish a certain point in time for me personally. I have sacrificed everything that I have to bring this project to this point. I now know that any failure of this project, temporary or otherwise, is not as a result of my efforts. I see the lack of energy becoming a problem in society, and I did what I could to avoid any difficulties. I no longer feel personally obligated to do what ever is required. Other then writing in this blog and building the community, there is little for me that can be accomplished. The financial resources of the industry are what are needed to move forward, and we will wait for that event to occur.

I am reiterating that the use of the Intellectual Property that has been developed is for the sole purpose and benefit of the communities that are represented at People, Ideas & Objects. Management may feel the opportunity to take these ideas and develop the systems based on this IP for themselves. I am providing notice to them, in this post, that no producer is authorized to use any of the IP that has been developed here at People, Ideas & Objects. Nothing. SAP and the systems vendors are provided with the same notice. The implications of these notices is that management will have to come up with your own ideas, develop them, and bring them to market. Remember, it only took me five years to develop the Draft Specification, I wish you God speed.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of at least one years time will occur. Our appeal should be based on the 30 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Perez, The New Technologies Part II

Yesterday's post started our comprehensive review of this 1986 paper "The New Technologies: An Integrated View". Professor Carlota Perez provided the tools for analysis that prove the common-sense nature of using the Joint Operating Committee (JOC). Today's post provides further proof of the times that we find ourselves in, and the context within this project. Specifically why there is so much conflict between the bureaucracy. Professor Perez states "A process of structural change in the economic sphere of the sort we have been describing cannot occur without conflict." A message that I would send to the directors of oil and gas companies, shareholders and investors. In this post we will detail the characteristics of this conflict, the scope of the opportunity and how this should be seen as the beginning of the rebuilding of the oil and gas industry. Where the innovative oil and gas producer provides significant investment opportunity and value generation.

III. Structural change and socio-institutional transformations.

To move to the JOC as the key organizational construct of the industry. Requires that we build the systems to support and identify the JOC. Moving the compliance and governance away from the hierarchy (the reason for the conflict) to alignment with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. This alignment, aided with the software development capability of People, Ideas & Objects, provides the producer firm to innovate off the rapidly advancing earth science and engineering disciplines. This common-sense approach to the oil and gas industry will provide substantial increases in performance. The evidence to that last claim is through the following analysis provided by Professor Perez.

Once the main guiding elements of a paradigm are established and the radical shift in the relative cost structure becomes clearly visible, the new ideal model grows in complexity and coherence, going far beyond mere technical change. In practice, it affects almost every aspect of the productive system. p. 14

I respond to each of Professor Perez' nine points individually.

a) New concepts for organizational efficiency at the plant level; p. 15

Clearly this is applicable as the Joint Operating Committee is the operational unit of all oil and gas. Not just locally but globally.

b) A new ideal model for the management and organization of the firm; p. 15

And as indicated, the source of the conflict. Management are not interested in giving up what they have worked to secure. They are in the driver seat and will be left at the back of the bus in this move to the JOC. That doesn't mean that management will not exist in the new systems. It will be different with a much more advanced skill set.

Organizationally we also see the changes in the producer firm. Focusing on the earth science and engineering capabilities of the firm and applying those to their asset base will be the key to value generation.

c) A significantly lower level of labor requirements per unit of output, with a different skill profile; p. 15

The previously mentioned different skill profile with management will similarly affect most workers within the industry. The lower level of labor requirement is a must-have in the future of the oil and gas industry. With the ever increasing volume of earth sciences and engineering involved in each barrel of oil, we will need substantially more effective labor inputs per barrel.

d) A strong bias towards the intensive use of the new key factor in technological innovation; p. 15

People, Ideas & Objects focuses on the business of oil and gas not the Information Technology. However, the IT provides the means for making the proposed changes. Without the IT the changes are not otherwise possible, and it's only through the recent maturation of IT that moving to the JOC is possible.

e) A new pattern of investment favoring sectors directly or indirectly related with the key factor and connected to the new infrastructural network, itself the object of a wave of investment; p. 15

I can see this happening. Professor Perez has always noted that financial capital has done its job. The current financial crisis is recognition that their job is done. Now is the work of production capital. The Draft Specifications Resource Marketplace Module provides for this type of activity. Where producers and suppliers work together to build the types of tools and services that are needed as a result of the expansion of the sciences. This "marketplace" module creates the market for the purposes described here.

f) A bias, therefore, also in the overall product mix, resulting from higher rates of growth in key factor related sectors; p. 15

If production capital has to choose between the innovative oil and gas producer, supported by People, Ideas & Objects software systems, and the bureaucracy...

g) A redefinition of optimal production scales leading to a redistribution of production between larger and smaller firms; p. 15

This has already begun. Those individuals that can team up with like minded people are able to establish significant production in very short periods of time. These teams have been discovered by the Shell's and Exxon's, and are finding a ready market for their skills. Within a short period of time, as little as five years in some cases, these innovative producers can sell the producer firm for several billions of dollars. If these small start-up producers had the innovative supporting software of People, Ideas & Objects available to them, it would be anticipated that the time frame would reduce, the International Oil Company could quickly take over the management of the property and the market demand for energy would be satisfied. I would anticipate that these "teams" would be able to generate larger production profiles in shorter periods of time with People, Ideas & Objects.

h) A new pattern of geographic location of investment as the new model redefines comparative advantages and disadvantages! p. 15

I'm surprised that this attribute is happening as well. The Preliminary Research Report was directed at the Canadian producers as its market for software development. I suggested in the report that if they didn't act, they would soon find the Calgary marketplace becoming a branch-plant of Houston. Unfortunately that is happening. Shell and other producers have moved their head offices out of Canada, and each day more decisions are made in Houston. This may also be a result of having two clusters of producers on one continent. Based on my statistics, either way, Canada, as a marketplace for People, Ideas & Objects, stands at a mere 3% of the U.S. marketplace and slightly behind South Korea.

i) New areas of concentration of the most powerful firms, replacing those prevailing in the previous paradigm. p. 15

I'm not sure, but this maybe the focus of the U.S. industry being the U.S. marketplace. If so then we can assume that the scope of the People, Ideas & Objects application modules will be defined by the users as the American producer focused on U.S. based production. And I'm good with that.

Professor Perez moves on to defining the effect of the financial crisis, and why it is human nature to have to go to such extremes of failure before we implement the necessary changes.

In the same manner, when a new techno-economic rationality propagates in the productive system, it becomes necessary to effect vast transformations in society as a whole to allow the deployment of its growth potential. p. 15

and

The crisis is truly a process of “creative destruction” but not only in the economy but also in the socio-institutional sphere. The new upswing can only be unleashed by means of vast socio-institutional innovations, in response to the requirements of the new paradigm and geared to facilitating the full transformation seething in the productive sphere. p. 16

Please note this "full transformation" whether that is with People, Ideas & Objects or another unknown system, will not occur without the software being built first. Spontaneous order as an economic phenomenon is questionable in today's society. Professor Perez states;

This process of social and political innovation is naturally long and full of conflicts. Nevertheless, production cannot be re-launched upon a lasting expansion path without re-establishing structural coherence, by arriving at a socio-institutional context capable of favoring the deployment of the new techno-economic potential. p. 17

And nothing along these lines will occur without the establishment of People, Ideas & Objects budget. We have much to do in terms of determining the right direction and processes.

Of course, the construction of a coherent socio-institutional framework, just as that of a techno-economic paradigm, is a gradual trial and error process, driven by the need to confront the various manifestations of the crisis and often hindered by the inertia of existing institutions and vested interests, associated with the old mode of growth. p. 17

With the petroleum industry responsible for offsetting 270 billion man days of physical labor each day, we have much to lose. I hope that we don't have to fully explore this crisis before we do something. And please remember none of the many years of development ahead of us will be easy. Clearly the bureaucracy will not act. And as Professor Perez suggests are too conflicted. Being part of People, Ideas & Objects is the beginning of how this process, the value generation of the oil and gas industry, starts.

This means that each crisis, each period of technological transition, is a point of indetermination in history. A quantum jump in potential productivity opens the way for a great increase in the generation of wealth. But the specific commodities that will compose that greater wealth and the way it will be distributed will depend on the socio-political framework arrived at. Historically, each transition has modified both the conditions of the various social groups within each country and the relative position of countries in the generation and distribution of world production. p. 17

Who will participate, and where is yet to be determined.

For each country, whatever the level of development reached in the previous wave, the need appears to make internal changes and to participate in the construction of a new world order. If the hypotheses presented here are a good approximation of the nature of the crisis and the means to overcome it, then, the best way to find criteria for a successful transition and make a leap in development prospects is a deep understanding of the new paradigm. This is possible because when the crisis becomes visible the paradigm has already diffused enough to be analyzed. pp. 17 - 18

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 26 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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