Showing posts with label Execution. Show all posts
Showing posts with label Execution. Show all posts

Wednesday, September 10, 2008

Professor Sidney Winter, Deliberate Learning and the Evolution of Dynamic Capabilities. June 2002

I have seen first hand the effects of blogs and wiki's in the development of this software application. These two technologies are transmitting the ideas contained within these pages throughout the world to like minded individuals. The effectiveness of this communication is intoxicating. Everyone that has an interest in this project can be metaphorically and literally on the same page. The communication of these ideas in any other medium would be impossible.

I feel my effectiveness and productivity are enhanced substantially by so many people reading and learning so much about these ideas. The beauty of these technologies is that the people who join this community will immediately find their effectiveness and productivity enhanced as well. As individuals join the community they're able to contribute and build off these ideas. Which brings us to this article by Professor Winter.

Professor Winter has been a valuable contributor to the establishment of the ideas contained in this development project. The label on this web log has 10 entries attributed to his papers. Winter's special area of expertise has been organizational learning and knowledge management. What he describes in this paper is directly applicable to this project, and therefore can help us to define the many pitfalls and opportunities we may encounter.

In his introduction he is very specific as to the type of organizational learning and the dynamic capabilities that an organization can attain.
This paper investigates the mechanisms through which organizations develop dynamic capabilities, defined as routinized activities directed to the development and adaptation of operating routines. It addresses the role of (1) experience accumulation, (2) knowledge articulation, (3) knowledge codification processes in the evolution of dynamic, as well as operational, routines. p. 339
The discussion therefore is not just about the knowledge repositories that we have, but also the speed at which organizational learning occurs. Professor Winter provides a framework in which we can analyze these attributes, defining them as;
Operating routines; Learning processes geared towards the operational functioning of the firm (both staff and line activities).

Dynamic capabilities; as the firm's ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments. p. 340
Dare I ask if it is possible to have this dynamic capability and operating routines inherent in our wiki within the first or second iteration of the Preliminary Specification? That is to say, can we capture the substance of the industries operating routines within the very initial work. And then, have the performance of the activities in our wiki actually impact the way in which the industry operates. Is it possible that, even before we commence the coding of software that these knowledge repositories are the key element in moving the industry understanding forward? I think that is what is being suggested here by Winter as he states.
Beyond theory building, we hope that the present paper provides useful guidance for future empirical inquiry into the role that articulation and codification processes play in creating dynamic capabilities. That is its principal purpose, and although the existing empirical base is thin, we consider that there is already good reason to believe that significant progress in that direction is quite possible. p. 350
and
DEFINITION. A dynamic capability is a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness. p. 340
Based on my understanding of the nature of the idea of using the Joint Operating Committee and those contained in the Draft Specification, our opportunity is not to just document the business within our knowledge repositories, but the ability to travel at a speed and understanding that is in excess of the earth sciences and engineering demands of the producers. Where the difficult questions are asked and with the collective intelligence of this community we are able to move the industry, build the software to support those organizational definitions and provide the producers with these dynamic capabilities.

Professor Winter defines the characteristics of the Learning Mechanisms and their influence on operating routines.

  • Experience accumulation.
  • Knowledge simulation.
  • Knowledge codification.

In the Draft Specification we have enhanced the role of the producer firm by adding two separate and distinct types of work carried out by those that work for the firm. Determining their focus as being either long term or short term is the definition between the two types of workers. These categorizations are contained within the Knowledge & Learning, and Research & Capabilities Modules of the Draft Specification. Whereas the Knowledge & Learning is focused on the operational efficiencies of the JOC and the Research & Capabilities focused on the long term and strategic development of the necessary attributes to expand the "Dynamic" capabilities of the firm.

In addressing why this is done, Professor Winter states:
In a relatively static environment, a single learning episode may suffice to endow an organization with operating routines that are adequate, or even a source of advantage, for an extended period. Incremental improvements can be accomplished through the tacit accumulation of experience and sporadic acts of creativity. Dynamic capabilities are unnecessary, and if developed may prove too costly to maintain. But in a context where technological, regulatory, and competitive conditions are subject to rapid change, persistence in the same operating routines quickly becomes hazardous. Systematic change efforts are needed to track the environmental change; both superiority and viability will prove transient for an organization that has no dynamic capabilities. Such capabilities must themselves be developed through learning. If change is not only rapid but also unpredictable and variable in direction, dynamic capabilities and even the higher-order learning approaches will themselves need to be updated repeatedly. Failure to do so turns core competencies into core rigidities (Leonard Barton 1992).
In the future the oil and gas producer is competing based on their land base, engineering and science based understanding and application, these are the critical skills to have. An innovation based producer that is dynamically generating changes needs to separate the research and implementation of ideas. Idea generation does not need to be present in the JOC. Confusion and mistakes would arise if the two functions were joined. Change and innovation are the constant that will drive the dynamic capabilities in the producer firm. Where the more dynamic the firm, the more innovative and successful.

To somewhat get back to the topic at hand. I started this entry on the basis of the collective understanding and application of knowledge in this blog and the wiki that holds the Draft Specification. This latter information shows how these same principles apply to the development of the systems in oil and gas. The 11 module draft specification is to the oil and gas producer as the blog and wiki are to this community. Winter discusses an important element of how these are achieved.
Opportunity Costs. Conducting debriefing sessions and updating tools after the completion of the task cannot be done too often without diverting attention away from day-to-day operations. A balance between explicit learning activities and execution activities, between thinking and doing, is essential (March 1991, Mukherjee et al. 1999). March et al. (1991) argue that with highly infrequent events, organizations can learn from quasi histories (i.e., "nearly happened" events) or from scenario analysis. Both mechanisms entail a substantial amount of investment in cognitive efforts and, most likely, rely on the creation of written output or on the use of electronic support systems to identify and make all the assumptions explicit.
Making the analogy between the wiki and blog of this software development project, and, the Research & Capabilities and Knowledge & Learning Modules for the producer firm. These are the higher value added processes that make a producer more competitive in the future. These tasks and activities are what would be considered incremental to what the energy companies are conducting today. Almost exclusively focused on the immediate quarter has achieved the optimization of the near term profits. However the focus on execution precludes the ability to generate and build value over the long term. This separation of roles and responsibilities is what the Draft Specification modules are providing the producer.

The point of this entry, I guess, is to suggest that these higher level learning processes are supported and enabled in today's technologies. Whether it is the blog and wiki used in defining the optimal organizational makeup of an oil and gas producer. Or the Draft Specification and understanding that underlays the firms ability to find and produce commercial quantities of energy, technologies role in enabling the higher organizational performance are critical, and I would suggest necessary. Winter suggests;
The framework introduced in this paper, particularly the knowledge evolution cycle and the relationships among learning, dynamic capabilities, and operating routines-constitutes, we believe, a significant clarification of the structure of the phenomena. This inquiry is, however, still in its infancy. We know little, for example, of how the characteristics of the organizational structure and culture interact with the features of the task to be mastered in determining the relative effectiveness of the various learning behaviors.
Basing much of the Draft Specification on the solid research of Dosi, Langlois and Winter provides sound academic founding for using the JOC. I believe I have also made the case that the bureaucratic companies are unable to make the transition to this type of system. As well as the case that the bureaucratic company is failing. The difficult task that is necessary to make the People, Ideas & Objects application modules real is the investors money, and the oil and gas worker. Please contribute to this by selecting the PayPal button to provide the much needed revenue, email me your information so I can send you an invoice, and join me here.

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Wednesday, August 27, 2008

The Secrets of Successful Strategy Execution

Research shows that enterprises fail at execution because they go straight to structural reorganization and neglect the most powerful drivers of effectiveness -- decision rights and information flow. p.2

Difficult to ignore a paper with that sub-title. Harvard has prepared a database of over 1,000 companies with 125,000 survey respondents. These people were asked specifically if the "important strategic and operational decisions are quickly translated into action, the majority answered no".

Here is the reason why so many of the companies that I have highlighted in the stock option review are failing. Harvard states;

Execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self interest.
Harvard used the information in their database to determine four criteria for more effective execution. They are;

  • Clarifying decision rights.
  • Designing information flows.
  • Aligning motivators
  • Making changes to structure.

Now I may be biased but I think this software development project scores high on each of the four criteria. Here's why;

Clarifying decision rights.

The Joint Operating Committee (JOC) is the operational decision making framework of the oil and gas industry. Only in the very rare situation in which a firm owns 100% of the working interest does this not apply. Yet none of the ERP software vendors, SAP or Oracle, recognize this fact or even the existence of the JOC. The business of the business can not be separated from compliance and governance. Therefore to clarify the decision rights requires that the JOC be recognized, supported and enabled within the producer organization, and appropriate governance and compliance is placed around the JOC's.

Looking at this situation from the firm perspective. Whether it is the Compliance & Governance, Analytics & Statistics and Petroleum Lease Marketplace modules. The decisions between the market and firm are clearly defined based on the well established culture of the industry. Enabling the JOC with the Information and Communication Technologies (ICT) and supported by a software development capability will clarify the decision rights that are held within the JOC.

Designing information flows.

The purpose of this software development project is to build the systems to make the information flows in the JOC (or market) and Firm (producers) more natural. Users are the key to defining what and how they do their jobs. Their jobs span the collective understanding of the entire industry. To preclude them from being involved in a software development role is the continuation of the top-down, disconnected and failed developments we have seen before.

Aligning motivators.

There has been a number of points made in this web log regarding the alignment of motivators. The JOC is represented by producer companies that are motivated equally by the profit interest. This is why the culture of the industry has placed the necessary mechanisms for the JOC to make the operational decisions in this business.

Making changes to structure.

In defining the boundaries of the firms, the Draft Specification has a remarkable influence in the changes made to the structure of the market, which includes the resources of the service industry. These are represented in the JOC and enable the collaboration, transaction management, automated processing and decision making to flow as a result of the desires of the participants.

On the other hand the firms role is expanded by parsing the firm between the short term and long term views. Adding the Research & Capabilities module to the Draft Specification ensures that the mechanisms and means are available to the firm to pursue the long term focus by some of its staff.

Harvard notes that the changes made in the first two categories have dramatic effect. And also note;
In efforts to improve performance, most organizations go right to structural measures because moving lines around the org chart seems the most obvious solution and the changes are visible and concrete. Such steps generally reap some short-term efficiencies quickly, but in so doing address only the symptoms of dysfunction, not its root causes. Several years later, companies usually end up in the same place they started. Structural change can and should be part of the path to improved execution, but it’s best to think of it as the capstone, not the cornerstone, of any organizational transformation. p. 2
They cite an example of how an anonymous firm restructured to reduce the volumes of layers of management. It was noted in the Harvard article, the same firm essentially had to redo the restructuring. By not defining decision rights and information flows in the first restructuring, the company implemented a temporary fix that was soon overridden by the management who reclaimed the former structure.

In a related article from Booz, Allen Hamilton "The Dominant Gene"
Unclear decision rights not only paralyze decision making, they impede information flow and precipitate work-arounds that subvert formal reporting lines. Blocked information flows result in poor decisions, limited career development and a reinforcement of structural silo's. p. 1
Sound like any oil and gas company you know? Think of this process next time you hear a CEO, COO or CFO promise an increase of X% over the production base. How is it that they are able to make these claims?

Redefining the role of the firm and market in the manner that the Draft Specification provides; is a move towards the culture of the oil and gas industry. Developing software to meet the demands of users provides the opportunity to have the entire scope of oil and gas operations and business handled in the most efficient manner. Then the producer can most effectively execute based on the criteria that Harvard notes here.

I wish to appeal to those that have an interest in making this software development project real. If you know of a producing company, or an oil and gas investor that is interested in sponsoring this project, please email the URL of the web log to them and join me here.

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