Langlois, Economic Institutions Part II

Comparing the existing bureaucracies that operate the oil and gas companies to the industry standard Joint Operating Committee provides value to those that work in the oil and gas industry. This is not an exercise that compares two theoretical situations in a vacuum. Both organizational constructs (markets and firms) exist and the examples provided in this blog reflect today's issues. As frustrating as it is for me to deal in the context of what "could" happen in the future, I would prefer to be working on building that future, I can console myself on the fact that these arguments are not theoretical in nature and have a strong academic foundation. Langlois notes:

The set-up here is an instance of what Coase in his later writings (Coase 1964) would call comparative-institutional analysis. Rather than comparing the world we observe against an abstract theoretical model (a practice Coase derided as “blackboard economics”), we should set two real-world institutions side-by-side and compare their respective costs and benefits. From the point of view of prescription or policy analysis, Coase’s plea amounted to a salutary attack on the doctrine of “market failure.” It is meaningless to compare real-world institutions against a blackboard standard of perfection, and dangerous to imply (often tacitly) that government intervention is in order without specifying the precise institutional form of that intervention and scanning it thoroughly for “government failure” (Coase 1964; Demsetz 1969). But the doctrine of comparative-institutional analysis also operates at the level of explanation. Implicitly in Coase, and explicitly in Williamson, one explains an observed organizational form by comparing that form with hypothetical discrete alternatives in order to show that the observed form minimizes transaction costs. The thought experiment is to compare “the market” as an organizational structure with “the firm” as an organizational structure. pp. 2 - 3

Suggesting that the Joint Operating Committee be the key organizational construct of the innovative oil and gas producer has a rich substance in that it is the legal, financial, cultural, operational decision making and communication framework of the industry. To move forward as an industry requires retirement of the bureaucratic ways of the hierarchy and recognition that the industry is based on partnerships. It is these partnerships that are summarily ignored in all of the ERP systems that are operating today.

The Draft Specification defines the boundaries of the firm with clear "market" and "firm" organizational structures. In September 2007 I prepared this chart of the Primary (P) and Secondary (s) roles and activities to take place in each of these organizations.

Construct	Market	Firm
Joint Operating Committee	P	s
Military Styled Command and Control (Governance)	s	P
Transaction Costs	s	P
Production Costs	P	s
Innovation	P	s
Routine, compliance and accountability	s	P
Research	s	P
Development (the D in R&D)	P	s
Financial Framework	P	s
Legal Framework	P	s
Cultural Framework	P	s
Operational Decision Making Framework	P	s

To the majority of people who have worked for a period of time in oil and gas. Will notice that these boundaries between the firm and market is a conceptual model of how the current industry operates! The difference is that the ERP systems that define and support the market and firm institutions only adopt a firm definition based on some theoretical example of a manufacturing firm (SAP). What is needed to fully explore and support the necessary innovation within the industry is that the ERP systems adopt these frameworks within the systems. A task that People, Ideas & Objects is providing with the Draft Specification. As Langlois stated above "we should set two real-world institutions side-by-side and compare their respective costs and benefits". Imagine how much better the industry might operate if our systems adopt the table above in comparison to SAP's determination of what a manufacturing firm might look like.

If we look at the table of how the Draft Specification defines the firm and market, we can ask how and where will the "gap filing" occur. Drawing on our example of a few days ago, in Transaction Design, we saw that the enhancement of some drilling technologies was the desire of some producers. Noting the needed capabilities were unavailable in the marketplace, the producers were able to approach a group of engineers who had done some extensive research into the problem. It was then incumbent on the producers to engage the engineers and fund and support the development of the capability. To who's benefit are these actions taken?

Let’s take a closer look at the nature of the “gaps” involved. Adam Smith tells us in the first sentence of The Wealth of Nations that what accounts for “the greatest improvement in the productive power of labour” is the continual subdivision of that labor (Smith 1976, I.i.1). Growth in the extent of the market makes it economical to specialize labor to tasks and tools, which increases productivity – and productivity is the real wealth of nations. As the benefits of the resulting increases in per capita output find their way into the pockets of consumers, the extent of the market expands further, leading to additional division of labor – and so on in a self-reinforcing process of organizational change and learning (Richardson 1975; Young 1928). p. 7

Based on the understanding put forward in yesterday's post. That Intellectual Property (IP) resides with those individuals, groups or firms that conduct the difficult work of solving problems and creating science & innovation. In yesterday's example the engineers will earn the IP and be able to market their skills and the developed capability to other producers that may have similar needs. The producers have benefited by either enhancing their reserves, increasing their technical capability, reducing their costs or increasing their production. Gap filling is a means of enhancing the division of labor.

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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Transaction Design

The Accounting Voucher Module of the Draft Specification provides a unique and valuable way of Designing Transactions. Based on the theories put forward by Professor's Richard Langlois and Carliss Baldwin, automation of the design of transactions is the next frontier in increasing productivity. As I mentioned in Mondays post, transaction design has been undertaken in oil and gas for many years. Specifically in the determination of who will provide which services on a drilling contract. Using this example this post will deal with the elements of transaction design that are captured in the Accounting Voucher module of the Draft Specification.

Stepping back a moment to include the discussion of Transaction Cost Economics (TCE). TCE involves the determination of where, the firm or market, transactions could take place. With the move to the Joint Operating Committee and the enhanced Information Technologies, transactions are best positioned in the marketplace. Therefore we need to be concerned about the variety of costs associated with transactions and that is a matter for another post. Using the software development capability provided by a fully funded People, Ideas & Objects helps to mitigate these transaction costs and bring a level of automation not otherwise available today.

So the question becomes, how do we automate much of the transactions costs is through transaction design. Taking the example of the drilling contract, an example of which can be seen in any well-file if you have access. One of the appendixes to the contract will be a summary of which services are provided by which firm, the producer, driller or third party. This overall task of selecting who provides the service is what I mean when we discuss designing transactions. The natural extension of this is to include high levels of automation to the bidding, negotiation, execution and transaction processing.

This is the logical "next" step in making these types of contracts and other processes more efficient. The question therefore is how is this done in the Draft Specification and Accounting Voucher. Recall the User Vision of the Draft Specification includes the Project Wonderland interface that enables avatars and virtual avatars. Project Wonderland is an element of the Draft Specification and an attribute that enables synthetic and virtual interactions and processes carried out between producers and suppliers.

If your still with me you might appreciate that this interface's capabilities provide a natural way of interaction between producers and the various communities of practice that are organized as Industrial Districts. If you wanted to tender a contract for bidding, you could release the tender to the Resource Marketplace through a virtual avatar for suppliers to submit a bid. Once the bids were in, you could select the winning bidder and start the process of synthetically negotiating and executing that contract.

Assume for a moment that you are drilling a well in a semi-remote region that requires a technical capability that is above and beyond what the specifications of any current supplier provides. Review of the Resource Marketplace module shows that a group of engineers are interested in testing their development of the otherwise unavailable capability. If the capability proves to work it would enhance the reserves of the drilled well. The producers will need to sit down with these engineers, fund and build the capability deliberately. Producers earn 100% of the sales of oil and gas production. It is therefore imperative that they develop the capabilities that they want and need to enhance their reserves and production profile. Otherwise they will be left to sit and watch their production spill out into the Gulf of Mexico like BP is. The futile nature of BP's efforts show that they are reaping what they sowed, nothing. Blaming Transocean and Halliburton is only the latest act in this comedy of errors.

And none of these capabilities will exist until such time as People, Ideas & Objects is fully funded. Oil and gas needs to deliberately go about developing these types of capabilities in order to benefit from them. Before they can be deliberately built they need to be organized and that is what People, Ideas & Objects has sought to do. Once built they need to be sustained and supported through their multiple iterations. The enhanced role of Information Technology (IT) doesn't spontaneously occur. Producers need to be active members in the Industrial Districts and People, Ideas & Objects Community of Independent Service Providers.

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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Langlois, Innovation and Process Part...

Today in our third installment of Professor Langlois paper "Innovation Processes and Industrial Districts" we discuss Transaction Cost Economics (TCE). Which are an important element of the Draft Specification. In 2009 Professor Oliver Williamson of Berkeley won the Nobel Prize in Economics for TCE, reflecting the heightened importance of this topic. Wikipedia defines the term here. Of note, once we have completed our review of Professor Langlois we will be moving on to a review of Professor Oliver Williamson. [Professor Williamson has the majority of his material behind pay walls and therefore are not freely available. I therefore will not be able to provide access to the documents.]

Professor Langlois talks about his concept of "Dynamic Transaction Costs" which he describes in his paper "Transaction Cost Economics in Real Time".

This paper attempts to place the theory of the boundaries of the firm within the context of the passage of time. More precisely, it resurrects and places in a modern frame some of the insights of the classical and Marshallian theories of organization. The modern reinterpretation of those theories centers around the 'capabilities' view of the firm. Taken together with governance costs, the capabilities of firm and market determine the boundaries of the firm in the short run.

Over time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost - the cost of transferring the firms capabilities to the market or vice-verse. These "dynamic" governance costs are the costs of persuading, negotiating and coordinating with, and teaching others. They arise in the face of change, notably technological and organizational innovation. In effect, they are the costs of not having the capabilities you need when you need them.

Indeed, in cases in which systemic coordination is not the issue, the market may turn out to be the superior institution of coordination. In general, the capabilities view of the firm suggests that we look at the firm and market as alternative -- and sometime overlapping -- institutions of learning. p. 99

This discussion of Dynamic TCE is important to the oil and gas industry. At today's energy prices the average upstream employee generates approximately $4.1 million in annual revenue. (Based on Total's production of 2.34 mboe / day, 16,005 employees and today's prices.) Oil and gas is a capital intensive industry. The number of people that are employed in the global oil and gas industry is small compared to most industries. It is this nature of the oil and gas business that brings the relevance of Langlois' theories. To be innovative, will be costly, to employ the style of marketplace dynamics discussed in this paper will also be costly. However, the ability to increase the productivity of the employees and Industrial Districts (ID) will require these investments, and the funds will not necessarily be a large percentage of the costs incurred in the oil and gas industry.

3. Life Cycle Considerations

To help us recall the terms of the discussion Langlois brings in this excellent summary.

Inspired by Adam Smith’s discussion of the benefits of the division of labor, a number of classic accounts of the life cycle have associated the development of decentralized production systems with an increase in the extent of the market (Young 1928; Stigler 1951). In Stigler’s version, for example, firms start out vertically integrated because small markets do not permit specialization. An increased extent of the market permits the spinning off of those stages of production that benefit from increasing returns, thus generating the potential for an industrial district. As an industry ages in Stigler’s account, declining demand for the industry’s output would lead to an eventual reintegration. It is the central insight of transaction-cost economics since Coase (1937), however, that production costs alone cannot determine whether the division of labor will be coordinated through markets (as in an industrial district) or internally within vertically integrated firms. Transaction costs also matter. And technological change is one important source of transaction costs. p. 10

The oil and gas industry is not subject to a decrease in demand and therefore provides no opportunity for reintegration. I would argue that the scientific demands of energy exploration and production are poorly served by the "integrated" bureaucracies. Moving to a greater market orientation, as in the Draft Specification, will marginally affect production costs, and materially enhance the value in designing transactions as the Accounting Voucher module provides.

I want to reinforce these points by pointing out that the majority of field operations are conducted by third parties. Designing transactions is currently done in standard oil well drilling contracts where the chairman of the Joint Operating Committee selects each element of the wells drilling will be provided / conducted by the oil well drilling firm or the producer. Designing transactions are not foreign to the earth science and engineering resources in oil and gas, they are foreign to the administrative or ERP systems that the producer uses. I consider the Draft Specification is aligning the systems to the culture of the industry. Langlois notes that this leads to.

Because ID's do not comprise an entire market, their role in the generation of technical standards is complex. The relatively close levels of association between firms in an ID can ease the setting of standards within the district because much of the agreement may be achieved informally and the limited number of firms within an ID makes it easier to bring the interested firms together. Furthermore when there are only a few integrators who are determining overall design, less discussion may be needed to achieve commonly accepted interfaces between components. The effects of concentration on overall industry standards are less clear-cut and an industry may fragment into a number of groups dominated by local standards without agreement being reached on an overarching set of standards because there is sufficient volume of output within each ID to allow for self-sufficiency. As a result, while ID's may accelerate innovation along certain trajectories, they may also encourage myopic behavior in the gathering, generation and use of new knowledge. pp. 12 - 13

In this discussion I hope that I have highlighted the nature of how the Draft Specification enables the greater market orientation. By moving closer to the cultural influences of the business, increased dynamic transaction costs will be minimal. That is to say the major impediments to the ways and means of the industry operating in a more innovative fashion. Is 1) management who are focused on the firm, and 2) the ERP systems that are designed from other industries or early stage technologies [SAP]. People, Ideas & Objects provides the industry with the opportunity for a greater innovative footing. By identifying and supporting the industry standard Joint Operating Committee and its culturally systemic ways.

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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Langlois, Innovation and Process Part II

Today we discuss the second part of Professor Richard N. Langlois' January 2008 working paper "Innovation Process and Industrial Districts". A summary of the first part of this series would highlight how the service industry, Community of Independent Service Providers (CISP), users and producer firms would re-organize themselves to facilitate innovation. With the producer firms focusing on their core competitive advantages of 1) a unique asset base and 2) application of the scientific and engineering capabilities available to them. Producers would be able to increase their reserves and deliver-ability. The knowledge, tacit and codified, residing in the "Industrial District" (ID), or Small Knowledge Intensive Enterprise (SKIE) of which the CISP would be considered a part of. As Professor Langlois noted, these communities may be organized in local, regional, national and international fashion with communication being encouraged between each.

Today we are discussing the enhanced division of labor and specialization necessary to expand the economic output of the oil and gas industry. With energy demand projected to be insatiable, the focus of the industry is changing. The scientific capability of the oil and gas industry is somewhat fixed and to increase output will therefore require new forms of organization. People, Ideas & Objects proposes to build the software that identifies and supports the industry standard Joint Operating Committee as the key organizational construct of the innovative producer. Within the software it is implicit that the enhanced division of labor and specialization is a key output of the Draft Specification.

2. Specialization and Embeddedness in Industrial Districts

Differentiation, Specialization and Integration

It is an economic fact that growth is achieved through Adam Smith's division of labor and specialization. To take the energy industry to drill a well may currently require over 1,000 specialized individuals when we consider the scope of individuals from the drilling firms billing accountant to the rig hands, to the geologist engineers and staff at the member firms of the Joint Operating Committee. To move to a higher level of performance will require a more defined and broader division of labor and specialization. How this comes about is suggested in Professor Langlois' discussion of ID's. Moving the majority of the science based capability to the market is the logical choice when we consider the real competitive advantages of producers are resident in their asset base.

The Resource Marketplace module of the Draft Specification facilitates Langlois' ID's. The point that I am attempting to focus on is the need to have the necessary systems in place to support the innovation based market. In addition, a software development capability such as contemplated by People, Ideas & Objects, is necessary to continue the iterative developments within the marketplace, based on the ideas of the greater oil and gas community. 

As adaptation usually takes time, a system that is optimized in the sense that there is near-perfect efficiency in the integration of inputs is probably not only stable but static and hence endangered if the surrounding environment is unstable (as is almost always the case). It is important, therefore, that an industrial district actively generate change in its internal relationships and in those with the outside world, and that it is flexible enough to absorb change without serious losses in efficiency. Inability to change either or both of the internal and external relationships contributed to the decline of such industrial districts as the textile and fashion district of Como (Alberti, 2006) and the eyewear manufacturing district of Belluno (Camuffo, 2003). p. 4

Flexibility has its costs and these directly affect performance. That is a given, and a static industry is a dying industry. I think that Professor Langlois clearly shows the risks and shows that a balanced approach may be the best strategy. We run risks and rewards in whichever direction we take. And maybe the optimal strategy is an ability to pre-select the balance of these criteria within the systems we build. Irrespective of the choices made. The key criteria is an enhanced specialization, division of labor and a capability to further enhance the division of labor and specialization.

Embeddedness and Centralization

In our first quarter 2010 budget drive we proved the management within oil and gas will not act to develop the Draft Specification. Alternatively we have turned to the investor / shareholder as the source of our budget funding. Oil and gas investors have the opportunity through People, Ideas & Objects to build the infrastructure necessary to manage their oil and gas assets in the most profitable manner. [The stated objective of the CISP.] Langlois ID's and Perez' SKIEs facilitate this form of organization through the industry standard JOC.

Because of their structure, industrial districts offer important benefits in innovation processes. For one thing, the high levels of differentiation and specialization allow firms, in the Smithian fashion, to focus on aspects of the supply chain in which they are especially competent. p. 5

What was able to be achieved through the hierarchy and "bigger is better" organizational thinking has been lost in the past 25 years. Bureaucracies were known to be inefficiently efficient, and for the past 100 years society has benefited greatly. We now see the multitude of stakeholders of these large corporations disenchanted by the performance of these organizations. Society is concerned about the environment, consumers are demanding more, better and faster service, and shareholders are being treated as poorly as could possibly be conceived of just a few years ago. The only benefactors appear to be the management. Their lack of financial support for the ideas represented in People, Ideas & Objects ensure that their way will remain unchallenged.

I see the future in many ways being an extension of the individual. The scope of an investors domain would be much smaller and be a direct function of his / her own capabilities. A move toward a much more hands on type of operation. Management is redundant, compromised and has lost the motivation to act on its stakeholders best interest. I foresee the management role being codified in the People, Ideas & Objects software that the investor uses to manage their operations. This assumes substantial administrative performance is provided to the investor.

The stakeholders that would benefit from this need to orchestrate this monumental change through active financial support of People, Ideas & Objects. With the Community of Independent Service Providers being a critical element of the embeddedness and a "virtual" Industrial District. 

Strong ties (Granovetter, 1973) among workers, including managers, can increase the amount of information available to firms and the readiness of people to share what they know when relationships gain a dimension of friendship to counterbalance the competitiveness among firms. p. 5

Communities of Practice and Knowledge Diffusion

To suggest that the oil and gas investor / shareholder, organized around the JOC, supported by the CISP and other ID's -- as represented in the Resource Marketplace module of the Draft Specification, is a fundamental and bold redrawing of the ways and means of the oil and gas industry. One that is based on an understanding derived from 30 years of working in oil and gas, utilizing the capabilities of the mature Information Technologies and steeped in the academic research conducted here. One sees a vision of how the industry could operate in a more natural and logical manner. One consistent with the culture of the industry, the JOC, that is summarily ignored by SAP and other systems vendors. A vision that deals with issues and opportunities that are open and available to those in the changed oil and gas industry. However, does this vision provide the enhanced division of labor and specialization that we are seeking?

When embeddedness is strong, the creation of communities of practice (Wenger, 1998; Brown and Duguid, 2000) generates competences that, although possessed by individuals, are collective in that they are based on a set of practices that is common to all members of a community. These competences (both tacit and codified) can transcend firm boundaries and become characteristics of an entire industrial district. As Marshall (1975, 197) wrote of nineteenth century Britain, “To use a mode of speaking which workmen themselves use, the skill required for their work ‘is in the air, and children breathe it as they grow up’”. p. 6

Langlois defines a risk associated with a limited distribution of the Industrial District. The limited division of labor and lack of significant levels of specialization obstruct the opportunity for this type of community to develop to their full potential.

Relationships within industrial districts therefore lead to diffusion but also to the creation of new knowledge through shared preoccupations. Because many people or firms can work on a problem simultaneously, a number of different solutions may be found (Bellandi, 2003b). The results is a larger and stronger "gene pool" within the sector (Loasby, 1990, 117), with the further advantage that solutions that are originally regarded as competing may turn out to be complementary and well-suited to different niches within the district.  p. 7

Although Langlois talks about networks and IT, not at the level needed for this discussion. Critical to the success of this type of industry re-organization will be a software development capability that is an active and involved member of the communities, ID's, SKIEs, CISP etc. This software development capability is what People, Ideas & Objects is proposing we build for these communities.

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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Langlois, Innovation Process Part I

Continuing on with our review of Professor Richard N. Lanlgois, we begin our review of "Innovation Process and Industrial Districts". This is a working paper that was published in January 2008 that deals with what are called "Industrial Districts" (ID) and is his contribution to the book "Handbook of Industrial Districts by Giacomo Becattini, Marco Bellandi, and Lisa De Propris". For the purposes of People, Ideas & Objects, ID's picks up on Professor Carlota Perez' Small Knowledge Intensive Enterprises (SKIE) which as you may recall, our Community of Independent Service Providers are a subset of. In our last few posts we were able to summarize the application of many of Langlois' theories in the Draft Specification.

Key to the success of the Draft Specification is the understanding of what the innovative oil and gas producers competitive advantages are. These are simply the unique asset base they hold and the direct application of the earth science and engineering capabilities available to them. It is considered that some of the engineering and earth scientists would be directly employed by the producer firms, however, there would be a pooling of these resources by the producers represented in the Joint Operating Committee (JOC). This pooling would be augmented by the service industries and a capability resident in the SKIE or ID in the local, regional, national and international communities.

Within an innovative oil and gas industry things will need to change based on the development and understanding of the sciences. Development, identification and analysis of this dynamic capability is what is being discussed in this paper by Professor's Robertson, Jacobson and Langlois.

Typically the Third Italy is dominated by production occurring in industrial districts. The districts are geographically defined productive systems, characterized by a large number of firms that are involved at various stages, and in various ways, in the production of a homogeneous product. A significant feature of industrial districts is that a very high proportion of firms within them are small. A characteristic of the industrial district is that it should be conceived as a social and economic whole. In industrial districts, social institutions are as important as economic. From Dansen and Whittam glossary of terms.

I am familiar with the Italian sun-glass manufacturers "Industrial District". It is in a region of Italy where the population of small towns are organized in a manner described in the definition. Most of the manufacturers and parts suppliers are working out of modified garages in their homes. The article that I read reflected that this enabled the Italians to focus on design and why they are regarded as the top designers. 

I find this paper challenges us in identifying many of the deficiencies and issues that remain unresolved in this proposed community / software development project. Many of the questions that should be asked are being openly discussed in this paper and provides us with the beginning of a discussion that addresses the question of "what's next". How will this community sustain itself and what are its risks and opportunities. Difficult questions and decisions that are needed to be resolved before they are discovered or happened upon. 

1. Introduction.

Innovation is based on the generation, diffusion, and use of new knowledge. p. 1

An appropriate comment and one that brings to mind the difficulties in achieving this within the oil and gas industry. Geography, the different professions involved, the complexity of the business of oil and gas, and the capability of the systems that support the business have to be built to accommodate innovation. What I see is these local, regional, national and international ID's all learning and applying the knowledge that is developed and made available. These ID's are a critical resource that are available to the JOC's and are the means in which knowledge is generated and diffused as innovation.

While it is possible to conceive of a firm that is so hermetic in its use of knowledge that all stages of innovation, including the combination of old and new knowledge, rely exclusively on internal sources, in practice most innovations involving products or processes of even modest complexity entail combining knowledge that derives, directly or indirectly, from several sources. Knowledge generation, therefore, must be accompanied by effective mechanisms for knowledge diffusion and for "indigenizing" knowledge originally developed in other contexts and for other purposes so that it meets a new need. p. 1

What more could be necessary then the generation and diffusion of new knowledge in the oil and gas industry. This is why the Joint Operating Committee takes on an enhanced role in this systems development, and why the innovative oil and gas producer needs these systems. You can't get there, to an innovative footing, from where the industry stands today. The primary focus of this software development is to enable the innovation that is necessary for the industry to meet the needs of the energy consumer. And that is simply through enhancing the knowledge, understanding, and use of ideas, a community of people focused on solving the difficult issues associated with the oil and gas business.

When accompanied by close social relationships, tight geographical proximity may affect innovation in ways that are less common in more highly dispersed environments. For example, an awareness of common problems can encourage several firms, or their suppliers and customers, to seek solutions, leading to multiple results that can be tested competitively in the market. These outcomes can then be relatively easily diffused among firms in the Industrial Districts (ID) because of embeddedness in a common environment. The obverse of this commonality of inspiration and ease of transmission of knowledge, however, may be an inordinately inward focus that results in an ignorance of or disdain for innovation processes in other regions or in industries not represented in the ID. Furthermore, there may be a relationship between the degree of embeddedness in the industrial district and innovation. It has been suggested that innovation increases as embeddedness increase up to a point, and that beyond that point further embeddedness results in reduced innovation performance at the firm level (Uzzi, 1997; Boschma, 2005). Thus, depending on circumstances, participation in an industrial district can either encourage or impeded innovation. pp. 1- 2

Leaving the question of the appropriateness of the concept of "industrial districts" use in oil and gas. We see the difficulty, or balance and risk associated with too much "embeddedness" and its consequences. In today's fast pace of change, the energy producer needs to be able to move with the developments in the underlying science, engineering and capabilities of the industry. Application and optimization of these to the producers asset base is the activity that generates the greatest value, the enhancement of reserves and productive capacity. Is it critical that a producer has the optimized means of drill bit manufacturing? Application of Industrial Districts or SKIEs is only a further extension of this logic or more defined division of labor.

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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Langlois on Chandler Part I

We move on to a review of Professor Richard N. Langlois and his research's application to People, Ideas & Objects. Langlois' research has been in the areas of the boundaries of firms and markets, modularity, transaction cost economics, the division of labor, capabilities and his "vanishing hand" theories. These are areas that were important in developing the Draft Specification, and as I recently noted both Professor's Carlota Perez and Richard Langlois' research have been critical in the development of People, Ideas & Objects. This review will highlight some of the key areas of Professor Langlois' research, we'll also look at a number of his recent papers that we have not discussed before, and review in detail his slide presentation.

We recently completed a review of Professor Alfred D. Chandler, and what better document to start our review of Professor Langlois then a look at his 2004 essay "Chandler in a Larger Frame: Markets, Transaction Costs and Organizational Form in History". Langlois begins;

In 1977, when Alfred D. Chandler's pathbreaking book The Visible Hand appeared, the large, vertically integrated, "Chandlerian" corporation had dominated the organizational landscape for nearly a century. In some interpretations, possibly including Chandler's own, The Visible Hand and subsequent works constitute a triumphalist account of the rise of that organizational form: the large, vertically integrated firm arose and prospered because of its inherent superiority, in all times and places, to more decentralized, market-oriented production arrangement. A quarter century later, however, the Chandlerian firm no longer dominates the landscape. It is under siege from a panoply of decentralized and market-like forms that often resemble some of the "inferior" nineteenth-century structures that the managerial enterprise had replaced. p. 355

The decline of the bureaucracy is of course the other major economic initiative that People, Ideas & Objects builds off of. Yesterday in our final review of Professor Carlota Perez' paper we defined the scope of the problem facing People, Ideas & Objects and its associated communities as being within our grasp or remaining rather distant. It is these large economic changes, the decline of the Chandlerian corporation, the great surge expected from the deployment phase of the financial crisis, that make the seemingly impossible tasks that we face, possible. Add to these economic times the impact of the Information & Communications Technology Revolution (ICTR) and we see the scope of our ambition may not be that far-reaching after all.

Moving to the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. Is a necessity to deal with the expanding earth science and engineering effort represented in each barrel of oil equivalent. Using the JOC we take the common-sense approach of aligning the bureaucracies compliance and governance frameworks with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. In a world dominated by the network model of organization, why would you not integrate these frameworks in this fashion.

Critical to the success of People, Ideas & Objects is the tacit knowledge held in the user communities and Community of Independent Service Providers. To enable this knowledge requires that it be accessible in more efficient means. Tacit knowledge can not be codified and is resident only within the people who work within the oil and gas industry. Networks and tacit knowledge need to be combined through a software development capability such as that considered by People, Ideas & Objects.

Much knowledge - including, importantly, much knowledge about production - is tacit and can be acquired only through a time-consuming process of learning by doing. Moreover, knowledge about production is often essentially distributed knowledge: that is to say, knowledge that is only mobilized in the context of carrying our a multi-person productive task, that is not possessed by any single agent, and that normally requires some sort of qualitative coordination - for example, through direction and command - for its efficient use. p. 359

In People, Ideas & Objects version of an innovative oil and gas producer. Acquisition of the necessary tacit knowledge is through the marketplace metaphor represented in the Resource Marketplace Module. Langlois also notes the critical nature of tacit knowledge as a competitive advantage.

In a world of tacit and distributed knowledge - that is, of differential capabilities - having the same blueprints as one competitors is unlikely to translate into having the same costs of production. Generally, in such a world, firms will not confront the same production costs for the same type of productive activity. Moreover, the costs that can make transacting difficult, and may lead to internalization, can go beyond those that arise in the course of safeguarding against opportunism or damping moral hazard through monitoring or incentive contracts. In such a world, economic activity may be afflicted with "dynamic transaction costs," the costs that arise in real time in the process of acquiring and coordinating productive knowledge. Members of one firm may quite literally not understand what another firm wants from them (for example, in supplier contracts) or is offering them (for example, in license contracts). In this setting, the costs of making contacts with potential partners, of educating potential licensees and franchisees, of teaching suppliers what it is one needs from them, and the like become very real factors determining where the boundaries between firms will emerge. pp. 359 - 360

I have extended this situation to include each participant of a JOC may effectively apply their own strategy to the assets. This strategy may not be known by any of its partners, and indeed, only in unique situations would each producer have the same assets in the region. For example, one producer may have surplus capacity in a near-by gas plant that is their key priority to optimize, whereas another may only have an interest in the producing gas wells.

To Langlois point about the tacit knowledge and the development of capabilities. One of the problems in oil and gas is that technical capabilities are developed within each bureaucracy to deal with any and all contingencies. With BP's current environmental PR efforts, we see that this containment within the bureaucracy is a failed application of capabilities. We need to also consider that the increase in scientific demands per barrel of oil requires more tacit knowledge from a constrained resource. The Draft Specification considers that these capabilities be dynamically generated through the service industry and the human resources of the working interest partners of the JOC. Only then will the future demand on these finite engineering and science based resources approach reasonable levels.

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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Perez, Crisis and Innovation Part VI

In a number of previous posts we briefly discussed Professor Carlota Perez concept of the Small Knowledge Intensive Enterprises (SKIEs). How this concept captures the Community of Independent Service Providers that are critical to the success of the oil and gas producer and People, Ideas & Objects software developments. This post deals exclusively with the topic of SKIEs and therefore accurately details the problems that our communities face. Through out her writings Professor Perez has consistently argued the need for a different point of view. A point of view of how things need to be structured in order for the deployment phase to be realized. Whether that is realized through enhanced government or business involvement is unknown at this time. What is clear is that these problems are what we face in building this software and are unaddressed by the current bureaucracy.

My argument that the management in the industry has been overly critical of the service sector is also a part of this discussion. During the 2007 - 2008 period we heard management complain that service industry costs were escalating excessively. Some companies went as far as to state that the service providers were gouging their clients. This in an environment where the oil price was $147.00, whom was really getting greedy. In retrospect, I think that the majority of these cost increases are attributable to management's inability to see the increased effort per barrel of oil.

The other area that I would raise that is directly on point with Professor Perez' discussion. Is the fact that the energy producers collect 100% of the funds for the primary and secondary industries involved in oil and gas. This does not entitle them to hold these resources from the service industries when the times get difficult. Cutting back on field operations has consistently been damaging to the ability of the service industry to fulfill its supporting role. People have been unwilling to see the oil and gas industry as a steady employer. They also see it as a boom-bust cycle where the hours demanded are excessive and the boom cycles introduce inexperienced field personnel to dangerous situations. The oil and gas producer should analyse the damage that occurs as a result of their turning on and off the financial support for the service industry providers.

Another behavior of the oil and gas companies is the ostracizing of those with alternative ideas. I have proposed a common sense approach to resolving the issues I see in oil and gas. An approach that strikes directly at the heart of the bureaucracy and renders them redundant. I am surprised at the scope of the efforts that have aligned against me. As we move into a world of ideas it is important to remember that ideas have consequences. And those consequences are not necessarily positive for all concerned.

SKIEs, SMEs and networks

Today's discussion extends these well known behaviors of the oil and gas companies. And applies them on a pro-active basis based on the future demands of a dynamic and innovative oil and gas industry. I think much can be learned by Professor Perez research and her development of the SKIEs as a critical resource. I think this is an area where industry should take detailed notes.

In this first quotation it is important to note that People, Ideas & Objects assumes that the innovative oil and gas producer is concerned with their earth science and engineering capabilities. And these capabilities as they are directly applied to the producers asset base. The remainder of the functions that are currently handled by the firm and marketplace are moved substantially to the marketplace in the Draft Specification.

There are at least two major consequences of the fact that the global corporations and the large firms increasingly achieve flexibility and higher competitiveness by outsourcing a significant part of the peripheral and of the highly specialised (non-core) activities. This practice is bound to result in much greater proportions of (1) the working population receiving irregular incomes and (2) the part of the economy without a cushion to withstand downturns. These problems directly affect general economic policy and the social security model while they indirectly condition innovation policy. pp. 30 - 31

The bureaucracy might argue then that they will provide for the field operations themselves. That all aspects of the field operations can be conducted by their company. In 2007 this strategy was also employed by some of the larger companies by buying drilling rigs of their own. It should be clear to anyone outside of the bureaucracies that these types of operations are destined to fail. Eventually the company would need to conduct their own research in drill bit manufacturing as a result of the entire secondary support industries leaving the energy industry. What Professor Perez brings to the table is a discussion based on the reality that the future will involve many smaller companies, not more bigger companies.

A much higher proportion of small units in the economy, taking care of a greater share of employment as well as of profits and national product, will require similar stabilising instruments to those discussed above and possibly new insurance schemes tailored to those special needs. p. 31

When we discuss the dynamic capabilities of the oil and gas industry as a whole. We are talking about the intangible nature of the services that are provided. The oil and gas industry fully understands the intangible nature of the industry. Most if not all costs of drilling a well are intangible services or unrecoverable costs. The category of costs that this project is concerned about, the CISP and People, Ideas & Objects software development costs, are going to be added to the dynamic capabilities of the oil and gas industry. These costs, like those in the secondary industries, can not be turned on and off without serious degradation and long term damage to that capability.

With the exception of companies specialising in biotech or nanotech or special materials, which may need high precision equipment, the other high cost is usually also intangible. It is the specialised software and the information services that they need to acquire to perform their job. Not meeting any of those payments can mean losing irreplaceable personnel or cutting-off the lifeline services. p. 31

The use of People, Ideas & Objects software application are free to the user communities and particularly the CISP. This however does not eliminate the argument that the producer firm will need to support the software development and cloud computing infrastructure on a go forward basis. With annual costs ranging in the $600 million to $1 billion for development and infrastructure, and several billion for the CISP, these costs are beyond what the industry has otherwise been willing to expend. However, it should be noted that the oil and gas producers are collecting over $3.5 trillion in annual revenues on oil and gas sales.

Innovative firms suffer from that problem in various ways. Specialised suppliers of Global Corporations (GCs) are expected to constantly do minor improvements and sometimes more significant ones. It can be that the user company is a partner in the innovation and jointly funds it with the supplier (it can also be a group of users) or that the supplier takes the initiative and seeks the funds. There are also suppliers whose speciality is to do development work i.e. they are innovators under contract. All those cases and many other situations can involve periods of no receipts at all (depending on the funding or contract arrangements) and also the risk of unpredictable delays. Of course, SKIEs are high profit companies and under normal circumstances would have reserves for these situations. But new forms of insurance and running lines of credit will need to appear as the number of companies with these characteristics grows. pp. 31 - 32

Much of these costs may currently be hidden in the services that are provided by employees in oil and gas companies. Employees that in this very near future will be deemed not core to the producers capabilities and asset base. And therefore become active members of the CISP.

It might be interesting to look at the network as the possible route to solving many of these new (or intensified) needs of small companies. There is already a tendency of similar companies to flock together to gain advantages of scale for certain activities that can be funded jointly such as training courses, international marketing, specialised software development, etc. The idea of collective insurance of groups of companies –in a sector or in a region– or even networks of networks, in order to increase the volume and reduce the risk premium could be an adequate direction to explore. p. 32

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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Perez, Crisis and Innovation Part IV

What is particularly interesting about Professor Carlota Perez' new paper "The Financial Crisis and the Future of Innovation: A view of technical change with the aid of history." Is her description of Small Knowledge Intensive Enterprises (SKIEs). In almost all respects they are the same as People, Ideas & Objects Community of Independent Service Providers (CISP). This post introduces Perez' SKIEs and we will also discuss them more extensively in a future post.

Due to the escalating efforts in the earth science and engineering contained within each barrel of oil. People, Ideas & Objects suggest the bureaucracies are too constrained to maintain their reserves and production profiles over the long term. We see symptoms of these in Encana's $5.5 billion loss, Shell's escalating costs and BP's inability to control their well in the Gulf of Mexico. Why are these incidents happening? The demands for energy, and the scientific demands of energy are beyond the strategies and capabilities of the bureaucracies. Shell recently noted their reorganization, that took several years, was recently completed. So why then have they lost control of their costs?

People, Ideas & Objects Draft Specification enables the producer firm to concentrate on the strategic needs of their asset base, at the Joint Operating Committee level, and their scientific and engineering capabilities. The producer firm is augmented by the marketplaces that support the innovative producer. The market includes the service industries and of particular interest to People, Ideas & Objects the Community of Independent Service Providers. These various communities are involved in providing many products and services that may have traditionally been done internally at the producer firm. This redrawing the boundaries of the firm is to enable the innovation in the earth science and engineering disciplines within the producer firm. And the communities to innovate in their area of expertise. Professor Perez notes;

A basic principle applied by corporations when disaggregating all their activities into separable components is distinguishing between core competences and complementary ones. The guiding idea is that the core competences are what gives the strength and the competitive edge as well as the long-term value to the company, while the other activities can in principle be outsourced without jeopardising the future. Yet, this notion of outsourcing is not about separating innovating activities from non-innovating ones. On the contrary, it is about deciding who will innovate in each area. p. 17

The net objective of defining the boundaries of the market and firm in this manner. Is that the individual Joint Operating Committee's, with their own unique strategies, are able to achieve higher throughput and innovation. Maximizing the reserves in place and optimizing their production.

The final result is that the whole network becomes an innovating machine with each part maximising its contribution and improving the whole at a much faster rate. p. 18

In this next quotation Professor Perez introduces her concept of the SKIESs. I find nothing in her definition that does not directly apply to the CISP. They are one and the same, and I assume that I was reading some previous paper of Professor Perez where the concept was developed. The only thing that I would add to her definition is that the CISP is a community that is focused on defining, building and deploying the People, Ideas & Objects application modules within the producer firms. They are dedicated to optimizing the profitable performance of the producer by using the development team and Information Technology resources made available to them. And would be considered a subset community of the greater number of communities within the definition of SKIEs

This practice of global corporations has very important consequences for the fabric of the economy. It induces the proliferation of small knowledge intensive enterprises (SKIEs) which are active innovators at the same time as they serve as a sort of technical infrastructure for attracting further user investment. The denser the fabric of SKIEs in an economy the greater will be the externalities for growth and competitiveness of the user firms. In addition, SKIEs themselves, in whatever field, are typically intense users of ICT services and of highly skilled human capital. They are also natural networkers with universities and other sources of information within and outside the country of operation. Finally, they are likely to participate in export markets, either through global corporations for whom they are suppliers or through their own efforts. That makes them key actors in the deployment of the knowledge society in each country. p. 18

It should be noted that I see many of the current producer firms employees forming SKIE's and CISP in the future. If you are an engineer or an earth scientiest I think it is fairly reasonable to assume that the producer will remain your primary employer. If you are not in those primary areas of the producer's domain of concern, employment in a SKIE or CISP is more likely. It should be clearly stated at this point that I don't see many of the CISP's being much larger then 5 to 25 people in total. Very specialized groups that are able to cater to the needs of a small hand full of producer clients. Professor Perez also sees these SKIEs as a subset of the Small and Medium sized Enterprises (SMEs).

A major consequence of this is a radical redefinition of the role of SMEs. Without ignoring the importance of the traditional small and medium firms, it would seem that the treatment of SKIEs and the catering to their support requirements, being fundamentally different from those of SMEs, will demand a different set of policies. p. 18

As we will see in a future posting, Professor Perez notes that the SKIEs need to be built in a dedicated fashion. Expecting them to spontaneously exist is dreaming. These capabilities have to be purposely set about to develop, much as People, Ideas & Objects software development capabilities, and sustained for the long term.

There is however a whole range of business-model and organisational innovations to be fostered in these sorts of services, the importance of which becomes greater the more advanced the economy. That is because they are stable employment creators (face-to-face services cannot be off-shored) and because they are possibly those that would most directly influence the quality of life in any particular locality. pp. 19 - 20

I would suspect that bureaucracies are now fully distracted by their escalating costs and flowing wells. The development of these communities and capabilities would therefore fall to the investor and shareholder in oil and gas who are expected to also support People, Ideas & Objects. BP's stock is down 15% and I would question their likely hood of being granted any future offshore leases in the U.S. With the precedent of the Exxon Valdez, this may cause serious damage to the firm. Such that the investor / shareholder might be the ultimate loser in this operational nightmare.

Thus, the hyper segmentation of markets, technologies and activities, is giving rise to an emphasis on the small business unit, be it as a direct part of a Global Corporation, as an independent or semi-independent supplier, as a start-up that can some day become a giant, as a franchisee, a member of a specialised cluster, a local provider of services or an independent expert unit in interaction with other global players in that particular niche. This not only implies giving particular importance to fulfilling the needs of SME innovation but truly paying particular attention to the different types of small companies and their specific requirements. This is part of what will be discussed in the final section. p. 20

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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One Platform to Innovate From

People, Ideas & Objects is about bringing a software development capability to the oil and gas industry. This is assumed as necessary to have innovation in the earth sciences and engineering disciplines drive the industry forward. A rapidly changing and innovating industry requires that the ERP software that it uses; supports and identify the industry standard Joint Operating Committee. People, Ideas & Objects brings this capability about through the development of the software as defined in the Draft Specification.

I mentioned a few day's ago the 20 developer teams we foresee in developing this application. One of these teams will be for the mobile platforms that are becoming common in the market. Whether these are phones or larger devices these products will bring about many changes to the prepared organization. I have also documented on this blog before that these types of devices threaten the unprepared organization in ways that I don't think are fully appreciated.

One of the ways in which the unprepared organization is challenged by these devices is the access to the new and innovative type of applications. Having to use the previous generations of technologies has a negative impact on the quality of work being conducted in the industry. If an engineer sees that the industry is unable to use these new technologies, they may decide to move to more progressive industries. People want to get the job done, not haggle with old technologies.

Another way is for the technology to enter the back door of the organization. This I feel is the worst possible situation. People using new technologies that the organization has no understanding of. There are over 140 thousand applications on the iPhone and soon to launch iPad. How many of these are involved in the operation of the oil and gas industry. Thankfully the oil and gas industry does not establish a large enough market for a developer to focus on them specifically, however, there are applications that are being used without the organizations knowledge. How many are accessing data and information that is of value to the firm or its competitors? It is reasonable to assume that there is data and information being prepared on these devices that the firms know nothing of.

These new devices are of substantial value in the hands of the oil and gas workers. Working remotely, or at the office, the ability to connect and interact with other people, data, applications (ERP & Mobile Apps) provides substantial value. The People, Ideas & Objects Mobile Teams Product Owner is able to provide these types of applications to the People, Ideas & Objects users and Community of Independent Service Providers. However, they are also able to ensure that the Security & Access Control, Data Model and Military Command & Control Metaphor are incorporated into the Mobile Applications. The ability to incorporate these application attributes are only possible to the People, Ideas & Objects Mobile Application team. The have the access to the other application modules of the Draft Specification, are innovation focused and most important of all are a critical member of the software development capability that People, Ideas & Objects provides the oil and gas industry.

It is disappointing to the community at large that these types of opportunities may fall another year into the distance. The discussion yesterday about the high probability of a funding failure hurts the industry in terms of dealing proactively with these technologies. The ability to ignore these technologies doesn't exist anymore. You either incorporate them into your business constructively, or let them enter the organization like a virus. It's the choice of the firm and unfortunately, if the funding failure occurs, this will be the way that the oil and gas industry deals with the new technologies. Not what the community wants to do.

With a purpose driven software development capability, what possibilities are there? This new iPad will have video chat enabled. Would it be constructive to have all the members of the Joint Operating Committee to meet virtually, face-to-face, with the other members? And could this be on an ad-hoc just-in-time basis, anywhere the participants are and anytime of the day? Would this provide value to the member firms? Of course it would. What would make the discussion more valuable would be the ability to have these discussion in a secure manner, that were respectful of the Compliance & Governance of the member firms, recognized the Military Command & Control Metaphor that dictates the JOC's pecking order, recorded any decisions made, authorized and implemented any plan of action, and lastly have access to the proprietary information and data of the property associated with the JOC.

One quick additional point about the use of a device like the iPad. Each producer firm that is a participant in the JOC will have their own unique strategy for the property. They also have their own costs and revenues. These are almost universally mutually exclusive to the strategies, costs and revenues of the other member firms. Would it be of value to have these other data elements show up to the participant for their own purposes?

All of the points mentioned are possible with the development of the Draft Specification and having the software development capability inherent in the People, Ideas & Objects offering. Approaching this type of opportunity in a constructive manner is the appropriate way to move. I would hate to lose another years time because the industry did not have the foresight to fund these types of developments. Its one thing for a separate organization like People, Ideas & Objects provides this type of functionality. Imagine if it was Exxon that owned and operated a software development capability and functionality like the Draft Specification. Would anyone else ever use it knowing it was owned and operated by one producer? What the industry needs is one platform to innovate from.

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 21 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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