The Preliminary Specification Part CCCX (FM Part XXX)

Once the producer has made the decision to invest in a property it is at that time they agree to participate in a Joint Operating Committee. Depending on how that JOC is structured will determine how the investment is managed from that point forward. If the producer has significant influence in the voting rights then they will be able to assert their ways otherwise they will have to work within the framework of the structure that is set up. That operational decision making framework is one of seven framework in the Joint Operating Committees which also includes the legal, financial, cultural, communication, strategic and innovation frameworks. Alignment of these frameworks to the compliance and governance of the firm is achieved through the eleven module People, Ideas & Objects Preliminary Specification. This alignment provides a speed, innovativeness and accountability that is not otherwise achievable in the current bureaucracies.

In an ideal world, the initial investment of the producer can be leveraged with debt. As we have already discussed this debt can be undertaken with a general assignment of the property itself. Therefore further aligning the equity and debt holders within the frameworks that we mentioned. So what does that mean. Making the reasonable assumption that all of the participants within a Joint Operating Committee are there to earn a reasonable return. Everyone has the same objective. Financial reward drives consensus. Everyone at the table has made the same percentage share investment, and with debt encumbering the property and only the property the scope of the decisions are within the domain of the property. In this ideal situation the resulting speed and focus of the decision making is consistent with an innovative oil and gas industry.

Not all investments will be able to be undertaken with bank debt or revenue from the property. Some will have to be sent back through the decision making process of being evaluated by the producer in the “Capital Allocation Interface” of the Financial Marketplace module. However, due to their low risk profiles they usually have a higher probability of being invested in. There is also the fact that the performance of the property is enhanced by the leveraging of the property by the debt. The return and risk profile that was used to evaluate the property in terms of investment worthiness by the producer did not assume any debt would be taken on. The debt is assumed once the property is successful and is producing. The debt is leveraging the return that the producer used in making their decision to proceed with the investment in the property. Therefore with much higher returns the property most certainly will be evaluated for further investment. At which time this new investment will be turned over to the Joint Operating Committee to manage further.

Tomorrow we will start with our fifth pass through the Partnership Accounting module.

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

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

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCIX (FM Part XXIX)

In previous posts we had discussed how the innovative producer would need to balance their speed and performance with control over some decision making processes to ensure they maintained the appropriate investment balance within their organization. This post will discuss in more detail how the Financial Marketplace module of the Preliminary Specification provides these sometimes contrasting objectives.

The speed and performance come about as a result of the demands from the capital markets. Investors want to deploy their capital at the critical moment when the results are about to be achieved. Such is the way of their business. Having their capital turnover quicker is a means to making it more effective. The innovative producers that are able to replicate this turnover within their organization will gain market recognition for their speed and performance. Let's call this the gas pedal. Speed is good but not at the expense of performance. Drilling a series of dry wells quickly doesn’t impress anyone. It is easy to understand what a reasonable approach involves when it comes to making this tradeoff.

There also needs to be a means to control what the firm is involved in in terms of investment criteria. This can be managed through the “Capital Allocation Interface” of the Financial Marketplace module. All investments are assessed based on their expected returns and providing for certain risk profiles. It is imperative that the firm evaluate every opportunity and critically review the results to ensure their investment selections are appropriate and within the framework of what the producer is able to carry out. Let's call this the brake.

And let’s be clear, most if not all the producers have these processes operating within their organizations. And not within the financial domain. What is proposed here in the Financial Marketplace module is controversial because of its administration of these processes within the financial jurisdiction of the organization. One in which this falls under the responsibility of the Chief Financial Officer and is administered in the Financial Marketplace module. It is my opinion, that the CFO will continue to move away from the financial to a more technical background. Having a geologist or engineer as the CFO will become the norm in the future. The CFO will have the technical accounting aspects provided to them by their accounting firm, the service providers and the staff that they employ. Their ability to discern which projects to proceed with will be as a result of the collaborations conducted within the speed, performance and control decision processes and their participation in the senior management or C class executive meetings. However, having these decision processes managed by a CFO who is an accountant would be the same as giving the keys to your Ferrari to a teenager, what positive outcome would you be expecting.

To manage these processes we turn to the Oracle Middleware layer and specifically the Oracle Business Process Management Suite. We need to take these from the spreadsheet and ad hoc nature that they are currently managed under and put them through a defined and rigorous process that meets the organization's needs. From the C class executives to the people who are grinding out the calculations. The decision process needs to be defined and managed by the software within the organization. It also needs to be highly collaborative with the decision making process well documented. It will be in this way that a firm can then learn from what its doing wrong, maybe most importantly. But also from what it is doing right. Right down to the detail of who came up with the idea and who pushed it through. And then you’ll begin to be able to answer who it is that is responsible for that last big success in your firm.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCCVIII (FM Part XXVIII)

Let’s get to the real issue that has to be dealt within the Financial Marketplace module of the Preliminary Specification. The cash. With each Joint Operating Committee being funded and operated through its own bank the cash of the producers will be scattered through a variety of accounts that are held within the various Joint Operating Committees they have an interest in. Or will they. Through this post we will trace the cash that is generated through the properties and the various operations that occur in the day-to-day of an oil and gas operation. What we will find is that from a cash balance point of view, the balances that the producer holds will be fundamentally unchanged between the People, Ideas & Objects method of conducting business and the way in which it is done in the majority today.

What happens today is the net proceeds from the operation of the property are determined, each working interest share of those proceeds are calculated, and depending on if the property is generating or consuming cash a check or invoice is sent. The difference in the People, Ideas & Objects system is that in the case where the property is generating cash instead of issuing a check, the balance will be transferred. In the case of where the property was consuming cash it would still send an invoice, and there would have to be some operating advance provided for the Joint Operating Committee to deal with the short falls while these invoices were being processed by the producer firms. In times when there are capital expenditures cash calls will offset the demand for cash.

One of the other key differences in the People, Ideas & Objects application modules is that the Joint Operating Committee is open to contributions from all of the participants. Producers are pooling their resources in order to fulfill the requirements of the property and that demands that everyone participate in some form or fashion. Each month these contributions are equalized in the process of determining the net cash payable or receivable and will be accounted for in the joint venture billing in that manner. These equalized amounts will affect the cash balance in terms of the size of the payment and a producer could be compensated for the two components through the joint venture billing process. One would be the net proceeds of the property. And the second aspect would be the amount of their contribution in excess of their working interest.

We have specified the Oracle Fusion Application Financial Management Suite as part of the Preliminary Specification in previous modules. For purposes of these cash management activities we will of course again be using the Suite for these purposes. I would caution readers that the manner in which these accounts are cleared have not been worked out. That is the purpose of the Preliminary Specification. These are still early days and it is problems such as these that need to be resolved with the $100 million budget. Today, the optimal method of dealing with clearing the balances in the joint account is through clearing accounts in the general ledger. There is no reason that we can’t modify that concept to allow for the contributions of all of the producers within a Joint Operating Committee to contribute to the joint account, be equalized and then cleared.

From another perspective, the interfaces to the variety of banks and producers accounts for deposits and withdrawals will be an area that will need to be worked through. Although this is not offering a technical issue as all of this is being done today, the volume of transactions will be high in comparison to today’s traffic. Banks are well prepared for this. Producers not so much. Particularly in the area of Compliance & Governance. Having automation of this type and at this level will make many people wince. They can continue with the paper based systems if they choose, the practical solution is that we build these systems with the appropriate internal controls to ensure that the process is managed efficiently and effectively and without the risks associated with this type of activity.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCVII (FM Part XXVII)

We invoke the “Marketplace Interface” with the technologies that are provided to us from Open Wonderland. The open source Java toolkit that creates the collaborative environment we call the “Marketplace Interface”. Sitting on the Oracle Fusion Middleware layer, this toolkit provides our users with simultaneous interaction for the Resource, Petroleum Lease and Financial Marketplace modules. The “Marketplace Interface” simulates a market where buyers and sellers engage, buy, sell and trade products and services. It is the ultimate collaborative environment. The user will have at any time the opportunity to option click to create a transaction, an AFE or some other form of business based on the interaction they are simulating in the marketplace. This post is to detail some of the activities that will be carried out within the Financial Marketplace module of the Preliminary Specification.

We fast forward a few years to where the demand for energy is very strong. Therefore the demand for capital in a capital intensive business is even more difficult. The need to promote the performance and speed of your company's capabilities is one of the necessary elements of the innovative oil and gas producers toolkit. What you want to do is engage the investment community in a discussion around the various elements of your performance. To do that you turn to your location within the “Marketplace Interface” that you have set up for selling / promoting oil and gas assets and the producer firm itself. It is here within the oil and gas property district that you have acquired some real estate to house the distribution and promotion of your properties and company. (Please review the video below.)

When you have engaged a qualified and interested buyer you are able to provide them with and execute a confidentiality agreement. Then you begin the presentation of the properties that you have in the package without leaving your desk or travelling anywhere. Next, an investor wants to know more about your team and what is the performance over the past three years and their current capabilities. All of this information can be easily compiled from within the “Marketplace Interface” as they are all part of the People, Ideas & Objects ERP system. Whether it be from the Oracle Fusion Middleware, Oracle Fusion Application Financial Management Suite or the People, Ideas & Objects application modules themselves, all of these application features interact and operate as one.

Or maybe the shoe is on the other foot, sort of speak, and you're in the market to acquire some properties. The ability to shop around the oil and gas property district in the “Marketplace Interface” gives you the opportunity to find the right property with a lot less time and cost involved. Having producers from around the world located in the district enables you to search globally as well as locally on all the criteria that meet your needs. Reviewing hundreds of reserve reports and evaluating the porosity of every formation has its rewards, but sometimes in a marketplace, it's something that someone says that piques your interest in a property. Having this open on your desktop and available all day would open a new world of opportunity to the innovative oil and gas producer.

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

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

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCVI (FM Part XXVI)

Turning now to the Financial Marketplace module. We find that it has been a while since we have posted anything to the module. A high level review would therefore be worthwhile to refresh everyone’s memory. The Financial Marketplace is the third marketplace module of the Preliminary Specification and relies heavily on the “Marketplace Interface” that we have developed for these three marketplace modules. It is also the module that we introduce some significant changes in how the banking and investment communities interact with the producer and Joint Operating Committee so lets begin.

The first point to make is that the Preliminary Specification enables the producers within a Joint Operating Committee to have a bank take a general assignment on the specific assets within a Joint Operating Committee. To deal with the partnership as its sole customer in the relationship and align its interests to the legal, financial, operational decision making, cultural, communication, strategic, innovation and compliance & governance frameworks within the Joint Operating Committee. By doing so the decisions regarding finance are to do with the financing of the property exclusively. You are dealing with one banker representing all of the producers and they are not constrained by the issues and opportunities that the producers have with other properties. The general assignment is to do with the Joint Operating Committee alone.

One of the implications of doing this is that the producer firm is going to have relationships with many banks. If not all of the banks within the marketplace. However, the logistical nightmare this would have caused in terms of handling the situation in the 20th century doesn’t exist in the 21st century. Having bank accounts for each Joint Operating Committee is possible when the automation of deposits and payments are at the level that they are today. These will be managed in the “Advanced Cash Management Interface” of the Financial Marketplace module. The key advantage is of course that the decision making process is fully aligned with the other frameworks. When a decision is needed, everyone is motivated by the financial gains of the specific property.

The objective of the Financial Marketplace module is to provide the producer with the speed and performance necessary to compete within the marketplace, however to maintain control over all of the firm. With the future demands for energy demanding more, and each barrel oil equivalent requiring more earth science and engineering effort, the speed and performance of the producer will become more prevalent in the marketplace. How the producer competes on the criteria of how quickly they can turn an investment into a return will attract the investment community. On the other hand employing the capital discipline of evaluating each and every prospect will be as important as ever. Turning over every stone to find the right investment for your team is how the control will be exercised in this prospective environment. These elements are handled in the collaborative “Capital Allocation Interface”.

It will also be a more personal connection that is made with the investment community. The capabilities of the producer firm are one of the key competitive advantages of the innovative oil and gas producer. How your firm performs is highly dependent on the quality of the team that you have put together. The need to promote that team within the constraints of the compliance and governance requirements will be a necessary part of the day-to-day of the producer firm. The “Technical Team Interface” is an investment community facing interface that provides a window to the investment community of your performance and capabilities in the earth science and engineering disciplines. This will be nothing more than what can be determined from other public sources however it will be focused on selling and promoting the team’s capabilities and innovativeness to the investment community. Included with that interface will be the firm's Revenue Per Employee variables and trajectories to offer direct comparisons to other producers.

Lastly there is the “Marketplace Interface” the ultimate, in my opinion, collaborative tool. The marketplace for financial service is very robust. No producer provides any of the services that are provided by a bank or investment house. All of the banks and investment houses provide their services based on a fee. What is needed is for the People, Ideas & Objects “Marketplace Interface” to be built to support this market and have the people interact and collaborate. Unlike the Petroleum Lease Marketplace where the service providers have to be created, they already exist in the Financial Marketplace module. Tomorrow we will begin on this point with the technology that supports the “Marketplace Interface”.

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

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

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCVIII (FM Part XXV)

In this our fourth pass through the Preliminary Specification we are discussing capabilities. Here in the Financial Marketplace module the capabilities of the financial marketplace are provided to the producer and Joint Operating Committee through interfaces such as the “Marketplace Interface” and the “Gap-Filling Interface”. It is through dynamic markets that the innovative oil and gas producer will find that their financial needs are met. And that is the point of this fourth pass, it is that the innovative oil and gas producers capabilities will be sourced from dynamic markets.

This will be the last post of our fourth pass through the Financial Marketplace module. Tomorrow we will be taking a step backwards to pick up some items that were missed in the Resource Marketplace module, and then we will resume our normal progression to the Partnership Accounting module.

I have been critical of the management of the oil and gas producers. They have resisted the changes proposed in the Draft and Preliminary Specifications and have governed as if all is well. It needs to be asked if the oil and gas industry is the same industry when it receives $100.00 for its products when only a few years ago it received $25.00? I’m not of the opinion that it is the same. There has been a fundamental change from a low cost easy energy era, to an innovation focused dynamic producer. The type of producer that operates in these two domains is fundamentally different. The Preliminary Specification is designed for the innovative producer. To make the transition from the easy energy era to the innovation focused dynamic producer will require that we build the Preliminary Specification first. The Financial Marketplace module is a critical aspect of the Preliminary Specification. By aligning the financial framework of the industry with the legal, operational decision making, cultural, communication, innovation and strategic frameworks we will achieve the speed, accountability and innovativeness we desire. In his book “The Dynamics of Industrial Capitalism”, Professor Langlois notes.

As soon as we go into details and inquire into the individual items in which progress was most conspicuous, the trail leads not to the doors of those firms that work under conditions of comparatively free competition but precisely to the doors of the large concerns – which, as in the case of agricultural machinery, also account for much of the progress in the competitive sector – and a shocking suspicion dawns upon us that big business may have had more to do with creating [the modern] standard of life than with keeping it down. (Schumpeter 1950 [1976, p. 82].) p. 2

My two criticisms of the management are that the velocity at which the management operates at is too slow, and the innovativeness is non-existent. In the financial marketplace the pace of activity will need to accelerate in order to address both of these issues. I think we have addressed these with the changes we have documented here in the Preliminary Specification.

Schumpeter’s account of progressive rationalization takes the form of a contrast between two modes of economic organization, modes roughly cognate to the difference between the small owner-managed firm and the large multi-unit enterprise. Characteristically, however, the issue in Schumpeter is a dynamic one: he is concerned with the respective merits of these two modes of organization not in the static allocation of existing resources but in generation of economic change and growth. The paradox of Schumpeter is that he famously defended, and has come to be associated with, both of these modes as drivers of economic growth. Schumpeter has returned to prominence today as champion of the role of bold entrepreneurs in creating new combinations and redirecting the means of production into new channels, to such an extent that he is revered as an inspiration to the present-day field of entrepreneurship studies (Shane and Venkataraman, 2000). In this (Schumpeterian) literature, the force behind economic growth comes from individuals or small groups of individuals who work mostly outside the established structure of organization rather than from within it. pp. 17 - 18

Big, small, lean or bloated with management I don’t care what configuration the producer firm is in. The future requires that we are able to provide for the markets demands for energy. If the financial crisis is waning then the economies of the world will begin to grow again. The increase in demand for energy is not something that we can currently contemplate. We need to get our head around this problem and start to deal with a solution. Muddling through just seems to be too much of a risk.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCVII (FM Part XXIV)

By way of a scenario I want to impart an understanding of how I see the Financial Marketplace modules “Marketplace Interface” providing the innovative oil and gas producer, and Joint Operating Committee with banking and investment dealing products and services.

You are the Chairman of the Joint Operating Committee for an area where you have a mutual interest with five other companies to conduct exploration in some shale gas. After many years of acquiring land and drilling to identify the scope of the reserves your companies have announced a major discovery of significant reserves. A vote was passed by 80% of the participating companies to undertake bank financing by a general assignment of those reserves to fund the gathering, compression and tie-in to a company owned gas plant. It was approved that these funds can be sourced from any bank that is willing to competitively bid for the business.

A specification and a detailed cost proposal has been developed to support the application for funds. Two individuals from the other companies who have participated in the Joint Operating Committee will be joining you in making the proposal to the banks. You have arranged to make the proposal to 16 banks located in New York, London and Hong Kong next Tuesday through the “Marketplace Interface” of the Financial Marketplace module. Three of the banks have relationships with two of the producers that are represented in the proposal.

It quickly becomes evident that there are technical questions regarding the nature of shale gas and the financial situation of company B. You are able to call upon the geologist for the project and the CFO of company B within the “Marketplace Interface” to answer these questions. This however causes you to overrun your time limit and you send the other two participants to the next meeting without you for now. Eventually bank A is satisfied and you return to the second meeting to find that the same questions have arisen. You quickly contact the CFO and geologist and ask them to edit video excerpts from the previous meetings answers, and include them with the proposal to satisfy bank B, and move on in time to bank C and so on.

Two days later you have received offers from 4 of the banks that you visited virtually. However, one of the banks offer stands out to the other three banks, and is accepted by those 80% of the participants in the Joint Operating Committee. The CFO’s, Lawyers, accountants and bankers of all of the participating companies of the Joint Operating Committee are informed of a closing two weeks from today. The closing will be held within the “Marketplace Interface” of the Financial Marketplace module. You have also scheduled the virtual signing of the AFE’s for the project to commence once the closing is complete.

What this scenario shows is the alignment of the financial framework is consistent with the legal and operational decision making frameworks. The decision to leverage the property with debt is the appropriate one from a business point of view. What the scenario also shows is the time required to make this bank debt happen. Even though there are more people involved in the decision making process, because of the number of companies in the Joint Operating Committee, the time needed to deal with everything is compressed and the exposure to the best deal was obtained with minimal administrative time incurred.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCVI (FM Part XXIII)

As we continue to document the capabilities of the various financial communities. And how these capabilities will be sourced from the marketplace by the producer firm and Joint Operating Committees. We see that technology is a large part of the organization. Particularly in People, Ideas & Objects Financial Marketplace module where the “Marketplace Interface” brings everything together. We continue today with our review of Professor Richard Langlois’ “Institution, Inertia and Changing Industrial Leadership.” And discuss whom it is that will find the “Marketplace Interface” the most valuable in their pursuit of oil and gas innovation.

If we look at the scope of the changes that are made as a result of Preliminary Specification they are substantial. The movement to the Joint Operating Committee has a remarkably significant impact on every aspect of an oil and gas concern. Added to that is the use of advanced technology and the innovative oil and gas producers operations are more in alignment with what an innovative oil and gas producers operations should be then ever before. Yet there is no support from the oil and gas companies. They remain trapped in concrete with their SAP installations. Living a bureaucratic life that is so far removed from the oil and gas business it is mind numbing. Adopting any change to People, Ideas & Objects is counter to the inertia that is built within the organization and something that will only happen through the forces of creative destruction.

And institutional change, we argue, can often take place through the more or less slow dying out of obsolete institutions in a population and their replacement by better-adapted institutions - rather than by the conscious adaptation of existing institutions in the face of change. p. 6

Therefore the people that will be attendant in the “Marketplace Interface” of the Financial Marketplace will be those that are able to accept the dynamics of industrial change and begin the process of renewal. Those looking for ways that are efficient and innovative in which to operate their oil and gas land and asset base, and deploy their earth science and engineering capabilities.

Another aspect of capabilities that has recently received a great deal of attention is organizational culture. In practice, not all organizations may be equally able to cope with change, as existing patterns of behavior involving both executives and subordinates may be resistant to change. Organizations develop collective habits or ways of thinking that can be altered only gradually. To the extent that a given culture is either flexible or consistent with a proposed change in product or process technology, the transition to the new regime will be relatively easy. If, however, the culture is incompatible with the needs posed by the change and is inflexible, the viability of the change will be threatened (Robertson, 1990; Langlois 1991; Camerer and Vepsalainen, 1988). p. 9

Can anyone portray a vision of how the existing bureaucracy will survive and prosper in the coming decade? Have these bureaucracies taken any steps to deal with these issues? What is the future of the oil and gas industry? Many questions that can be answered by selecting and supporting the People, Ideas & Objects software development capability and Preliminary Specification.

Teece... fails to note that the inflexibility, or inertia, induced by routines and the capabilities that they generate can raise to prohibitive levels the cost of adopting a new technology or entering new fields. Such inertia can develop to the extent that existing rules are both hard to discard and inconsistent with types of change that might otherwise be profitable. p. 10

I may yet be surprised that one or two of these behemoths might be able to break these chains of their own mindset. However, I’m not holding my breath.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCV (FM Part XXII)

In today’s post we continue with our discussion of the “Gap-Filling Interface” in the Financial Marketplace module of the Preliminary Specification. And how a software development capability like that which is proposed by People, Ideas & Objects is necessary to support the changes that are instituted by the gap-filling process. But before we get to that I found these quotes from Professor Richard Langlois in his paper “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.” They detail exactly what the gap-filling process is.

As Harvey Leibenstein long ago pointed out, economic growth is always a process of “gap-filling,” that is, of supplying the missing links in the evolving chain of complementary inputs to production. Especially in a developed and well functioning economy, one with what I like to call market-supporting institutions (Langlois 2003), such gap-filling can often proceed in important part through the “spontaneous” action of more-or-less anonymous markets. In other times and places, notably in less-developed economies or in sectors of developed economies undergoing systemic change, gap-filling requires other forms of organization — more internalized and centrally coordinated forms. p. 6

and

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

As gaps are discovered they are published in the “Gap-Filling Interface” of the People, Ideas & Objects Preliminary Specification. There they can be seen by the banks and investment houses that are providing the products and services to the producer firms and Joint Operating Committees. And in turn, develop a product or service to fill that gap in a manner that meets the need that was identified. The reverse is also the case, that the banks and investment houses may initiate the discovery of a gap and have the producer or JOC fill the gap. In either of these scenarios the division of labor and specialization doesn’t consider the fact that the 21st century organization requires software to identify and support the roles and responsibilities within it. If we are to have “gaps” filled, its not just a matter of having someone fill in the new position. It also requires that a dedicated software development team be available to prepare the software for the role to be productive and functioning within the greater system. This is the role that People, Ideas & Objects is proposing in the Preliminary Specification. It is not a destination in terms of what the specification will be, but more a journey where the end result is a continuously improving system driven by its users needs.

The other aspect of this software development capability is that this is prospectively an innovative oil and gas industry. Currently, management operate on the basis of what is considered the acceptable norm in terms of operations. They will need to break this mindset and become the innovative producers we all know deep down they want the industry to be. Either that or the forces of creative destruction will be set upon them. Either way the need for a dedicated software development capability will be necessary. Professor Langlois notes the following.

The second hypothesis, which has resonances at least as far back as Gerschenkron’s famous “backwardness” thesis (Gerschenkron 1962), is that the way an economy responds to the problems of coordinating economic development depends not only on its own institutions and capabilities but also on institutions and capabilities elsewhere. It depends not only on an economy’s own history but on the history of other economies as well. The force of this observation is that an economy at the frontier of economic development (however we care to define that) is likely to respond to the coordination problem differently than an economy lagging behind that frontier. Specifically, an economy at the frontier is arguably more likely to rely on decentralized modes of coordination. This is so because uncertainty is greater at the frontier — uncertainty about technology, organizational form, market direction. p. 18

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCIV (FM Part XXI)

Based on yesterday’s post we have begun to account for and capture the costs of change, or “Dynamic Transaction Costs” in the Financial Marketplace module of the Preliminary Specification. Today and tomorrow we are going to discuss the manner in which the changes from the firm to the marketplace will occur and the importance of having a software development capability like that provided by People, Ideas & Objects. We will also be discussing some of the interfaces that were previously introduced in the Resource Marketplace module that will be needed here in the Financial Marketplace module. The quotations for this blog post are from Professor Richard Langlois’ “The Vanishing Hand: the Changing Dynamics of Industrial Capitalism.” We begin by noting that although the marketplace for banking and investment dealers is well established, the coordination capabilities within the producer firms and the “Marketplace Interface” of the People, Ideas & Objects Financial Marketplace module are not available.

The basic argument - the vanishing hand hypothesis - is as follows. Driven by increases in population and income and by the reduction of technological and legal barriers to trade, the Smithian process of the division of labor always tends to lead to finer specialization of function and increased coordination through markets, much as Allyn Young (1928) claimed long ago. But the components of that process - technology, organization, and institutions - change at different rates. p. 3

Part of the process of developing the Preliminary Specification will be to identify the various standards that affect the markets and firms within the industry. These standards are part of the market-supporting institutions. It may be through this process that it is determined that the market supporting institutions are inadequate for the producers and Joint Operating Committees needs. And it will be the responsibility of the user communities that are part of the People, Ideas & Objects software development to identify those standards that are needed to ensure these markets are established and operating appropriately. It will also be necessary to ensure that this is a continuous process in which the evaluation of the market-supporting institutions are undertaken frequently to ensure that the producers and JOC’s needs are continually met.

As in Chandler, secular changes in relative prices attendant on "globalization" (driven by technology or politics) affect economic organization not only directly but also, and perhaps more importantly, indirectly through changes in technology. Production costs matter as much as transaction costs (Langlois and Foss 1999) Moreover, the kind of transaction costs that matter in history are often not those of the Williamson kind but those I have labeled dynamic transaction costs (Langlois 1992b). Costs of coordinating through markets may be high simply because existing markets - or more correctly, existing market-supporting institutions - are inadequate to the needs of new technology and of new profit opportunities. But when markets are given time and a larger extent, they tend to "catch up," and it starts to pay to delegate more and more activities rather than to direct them administratively within a corporate structure. p. 5

To provide for these market-supporting institutions and to bring in new services if they are needed, I want to reintroduce the “Gap-Filling Interface” that has been introduced elsewhere within the Preliminary Specification. The further specialization and division of labor is achieved through the process of filling gaps. Jobs that were not done before are filled by new tasks and people who then expand the division of labor. This is the simple process of how it is done. The “Gap-Filling Interface” allows the producer firm or Joint Operating Committee who sees a Gap within the service industry offering, publishes their finding within the “Gap-Filling Interface” for those product or service providers to configure their organization to provide. The key is that with the time and distance that exists within the oil and gas industry, the demand for a service and its supply might never know of the others existence. With the “Gap-Filling Interface” there is a reduction in the time and space by using the Information Technologies that are available today. The “Gap-Filling Interface” can also be used from the other perspective of the service provider configuring a product or service that fills a gap, then publishing that to the producers and JOC’s.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCIII (FM Part XX)

In today’s post we want to discuss “Dynamic Transaction Costs” in the Financial Marketplace module of the Preliminary Specification. These are the costs that are incurred when we establish a “Marketplace Interface” like that which we discussed in the past few posts. Dynamic Transaction Costs are incurred when capabilities are moved from either the firm to the market or vice-verse. But first in a paper entitled “Transaction Cost Economics in Real Time” Professor Richard Langlois provides us with this definition of capabilities.

This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge” and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." For the most part, Richardson argues, firms will tend to specialize in activities requiring similar capabilities, that is, "in activities for which their capabilities offer some comparative advantage" (Richardson 1972, p. 888). p. 27

We have also added ideas to the definition of capabilities. The financial marketplace, that is the banking and investment communities, capabilities are currently accessed by the oil and gas industry through the marketplace. Therefore the changes and the Dynamic Transaction Costs will be as a result of adapting to the “Marketplace Interface” of the Financial Marketplace module, and will be minimal. This is particularly in comparison to the Dynamic Transaction Costs that will be incurred in the Petroleum Lease Marketplace module. Where the marketplace currently doesn't exist and the capabilities are held within the producer firms. What Professor Langlois describes as Dynamic Transaction Costs is as follows.

Over time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost - the cost of transferring the firm's 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. p. 99

What we therefore need is to record these costs for the producer firm and Joint Operating Committees. To have an account that clearly defines the Dynamic Transaction Costs, whatever they may be, within the chart of account of the firm or JOC. This would help to identify and control the costs. This would also be the case for the Resource and Petroleum Lease Marketplace modules. Although some of the producers costs for “change, notably technological and organizational innovation.” would be associated with the fees that are paid to People, Ideas & Objects. There are other out of pocket expenses that the firms are incurring to make the changes to the “Marketplace Interfaces” and it is these costs that need to be captured in the accounts.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCII (FM Part XIX)

In today’s post we want to discuss the elements of modularity and apply them to the Financial Marketplace module of the Preliminary Specification. We also want to expand further on the videos that were introduced yesterday and describe how the “Marketplace Interface” would be built within the Open Wonderland interface.

What we have described so far in the Financial Marketplace is a comprehensive area where the banking and investment communities conduct all of their business with the producer firms and Joint Operating Committees. This would involve not only the day to day payment of bills but also the closing of a major financing. We have also discussed this would enable the alignment of the seven frameworks of the Joint Operating Committee, which includes the financial framework, with the compliance and governance of the firm. The “Marketplace Interface” being a place where people would go to have their financial “things” taken care of. From Professor Richard Langlois’ “Modularity in Technology, Organization and Society”.

What is new is the application of the idea of modularity not only to technological design but also to organizational design. Sanchez and Mahoney (1996) go so far as to assert that modularity in the design of products leads to - or at least ought to lead to modularity in the design of the organizations that produce such products. p. 1

and

Why are some (modular) social units governed by the architecture of the organization and some governed by the larger architecture of the market? p. 2

What we have learned from Professor Langlois is that modularity depends on interdependency and standards. If we include compliance and governance within the standards definition, then the Financial Marketplace, with banking and investment capital standards, are ripe with standards. Interdependency reduces the focus of the user to just banking. If the user wants to find a P&NG Lease then they go to the Petroleum Lease Marketplace, the Financial Marketplace has nothing for them. Interdependency reduces the interactions between the elements within the modules to simplify the systems within each module. If everything was contained within one module the interdependency would be so high that the system would not function as effectively.

"In organizational and social systems - and perhaps even in mechanical ones as well - it is possible to think of interdependency and interaction among the parts as a matter of information transmission or communication." p. 5

Lastly Professor Langlois provides us with a clear understanding of what is required within a modular system design. These are some of the guiding principles that I am using to write the Preliminary Specification.

• An architecture specifies what modules will be part of the system and what their function will be.
• Interfaces describe in detail how the modules will interact, including how they fit together and communicate.
• And standards test a modules conformity to design rules and measure the modules performance relative to other modules.

I now want to take the opportunity to discuss the videos that were presented in yesterday’s post. Specifically the one which is re-posted below. It has the commentator highlighting the different buildings that he has built, and the terrain that he has set out in his virtual world. Here is how the “Marketplace Interface” will start out. Banks or investment houses will set up a building and their people will be able to set up demonstrations and marketing presentations to those who may be just walking around to the various buildings within the “Marketplace Interface”. When they see something of interest they will be able to engage one of the bank or investment house representatives and begin a discussion of how they could help their producer firm or Joint Operating Committee. Once the relationship has begun the producer / JOC could return and have their needs met virtually by the firm represented in the “Marketplace Interface”.

The advantage of this is obvious to me, however, it may not be obvious to everyone. This is not technology for technology sake. This is a marketplace for business purposes. A completely different situation to the current social media experiments which appear to have no business purposes behind the interactions. Within the “Marketplace Interface”, which is full of interactions the People, Ideas & Objects ERP systems are available for use by the parties within the virtual world. If they conduct a transaction then it can be handled virtually. If they close a deal that can be handled virtually within the “Marketplace Interface”. The transaction management is what makes this video transform from a useless technological experiment to a potential for so much more.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCI (FM Part XVIII)

I think we have firmly established that by placing a virtual interface, the “Marketplace Interface” over the financial marketplace we would be able to provide the capabilities of that market to the innovative oil and gas producer and Joint Operating Committees. Having this marketplace would provide access to the skills, knowledge, experience and ideas of the banking and investment communities in an environment that is administratively more efficient, effective and timely. This is a critical aspect of the innovative oil and gas producer and therefore a critical aspect of the Financial Marketplace module of the Preliminary Specification.

The oil and gas industry is a capital intensive industry. The access to capital is a necessary and primary ingredient to any producers success. Without the needed access to capital, unfortunately, its just ideas. Unfortunately as well there are skills that are needed to access the capital markets that are not evenly distributed. These “access” privileges are hold outs of the last century. In the future the strength of the ideas and the potential of the deals will be what drive the frothing at the mouth of investment dealers. Therefore creating marketplaces where access is open to all parties is how things will get done.

By accessing the banking and investment community through the “Marketplace Interface” the innovative oil and gas producer and Joint Operating Committees acquire the financing and banking capabilities that they need. Allowing them to focus on their key competitive advantages of their land and asset base, and earth science and engineering capabilities. To do otherwise is foolish. The scope of what is called for to succeed within their domain of competitive advantages is broad enough. To expand it unnecessarily into other areas is incomprehensible in today’s business environment.

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of co-operating individuals. p. 17

And that would include areas that are part of the Resource Marketplace module. No producer would own their own drilling rigs as part of their competitive advantage, yet some Canadian producers like Encana Corp. think that is the key to their competitiveness.

Industrial economists tend to think of competition as occurring between atomic units called "firms." Theorists of organization tend to think about the choice among various kinds of organization structures - what Langlois and Robertson (1995) call "business institutions. But few have thought about the choice of business institution as a competitive weapon. p. 1

The “Marketplace Interface” in the Financial Marketplace module of the Preliminary Specification provides a window for the producer and Joint Operating Committee on the banking investment communities. A virtual world where the interactions and transactions are unlimited and undefined. Watching this video from Open Wonderland will provide you with an understanding of how the interface would operate. Note how random most of the interactions seem to be. If those random interactions are with like minded investment dealers, wouldn’t that be a good thing?

and

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CC (FM Part XVII)

When we talk about the capabilities that the producer firm or Joint Operating Committee acquire through the “Marketplace Interface” of the Financial Marketplace module of the Preliminary Specification. It is the full scope of the financial capabilities and money management that the banking and investment dealers provide. These are acquired through the simple process of paying a fee when necessary. These markets are “thick” and there are many standards that support them, the costs in terms of executing the transactions are negligible, or in other words, ideal for the “Marketplace Interface”.

When we think in terms of the boundaries of the firm and the markets, there is not much ambiguity as to which lays in which domain. Banking is banking and oil & gas is oil & gas. Would any producer attempt to provide the services of a bank as a value added process for its shareholders today? Why would it assume that it would be able to provide a better lease administration process then one that can be done on an industry wide basis as in the “Marketplace Interface” of the Petroleum Lease Marketplace?

Just as in the Petroleum Lease Marketplace in which the marketplace infrastructure, or standards and other market supporting institutions are already in existence. The marketplace in the Petroleum Lease Marketplace needs to be created, whereas here in the Financial Marketplace it already exists and in essence only needs the virtual interface, the “Marketplace Interface”, built to emulate the marketplace. In the Petroleum Lease Marketplace the entrepreneur’s need to establish the service offerings and provide the services to the producers and Joint Operating Committees, whereas in the Financial Marketplace that infrastructure, the banks and investment houses, already exists.

Acquiring the capabilities of a bank or a lease administrator through the marketplace is a choice that the 21st century oil and gas producers need to make. The People, Ideas & Objects Preliminary Specification have assumed that these processes are best left to the markets to provide for the producers and Joint Operating Committees. The producer and Joint Operating Committee are best left to focus on their land and asset base, and earth science and engineering capabilities as key competitive advantages and the majority of the processes that support those tasks can be provided by robust marketplaces.

This manner of operations is consistent with the means of how innovative organizations are able to operate in other industries. It is also wholly inconsistent with the current management thinking of the oil and gas industry today. Theirs is an attitude that will maintain command and control of all aspects of the oil and gas producer firm to ensure that “management” maintains its “power” for a while longer. If not for the Internet these ideas from People, Ideas & Objects would not be communicated to like minded individuals, and management would remain unchallenged in their position. There are distinct advantages to relying on the marketplace for the administration of these administrative processes. We will be discussing those advantages here, and how the Preliminary Specification provides those advantages, in the next few days.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCIX (FM Part XVI)

We continue our discussion of the “Marketplace Interface” of the Financial Marketplace module of the Preliminary Specification. In yesterday’s post we noted how the banking and investment dealers were providing their services to the oil and gas producers and Joint Operating Committees through what Professor Richard Langlois would call Transaction Cost Economics. The services were provided at a fixed service cost that was passed to the producer / JOC as a transaction on the completion of the service. The division of labor and specialization of the service was the responsibility of the bank or investment dealer and they were free to organize themselves in any fashion based on a competitive pricing of their services. Today we want to explore the “Marketplace Interface” a little further and how the transaction costs will impact the way in which the marketplace will operate for the producers and JOC’s.

The whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all. ...The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more that is reflected in the price movement. (Hayek 1945, pp. 526 - 527)

With producers maintaining relationships with possibly each and every bank. This as a result of banks financing all of the Joint Operating Committees partners in a property. And possibly the same situation occurring with multiple investment dealers. The need for the marketplace to deal with the logistical aspects of the finances with each bank and investment house will be necessary. There is however not much of an issue with respect to this manner of handling the finances. The majority if not all of the payments and receipts of the banking can and should be managed in the People, Ideas & Objects Preliminary Specification electronically. The need to print checks or to make physical deposits is something that occurred last century. Another thing that happened last century was the need to manage the cash in this various accounts. The Financial Marketplace module will provide an “Advanced Cash Management Interface” to enable the appropriate cash management is applied to the producers cash resources.

One of the other aspects of this marketplace is the topic of discussion and type of transaction that can be undertaken in the marketplace. With so much activity in the oil and gas producers domain. This as a result of the volume of work needed for each barrel of oil equivalent produced and the demands on every one's time. The amount of travel may be limited in the future and the reliance on the “Marketplace Interfaces” of the Preliminary Specification as a replacement for some of the face to face time that is done now is a possibility. If a transaction can be done as efficiently virtually, and might I suggest a closing, then the “Marketplace Interface” would be worthwhile building just for that purpose. Let alone for the day-to-day transactions of paying bills and depositing money.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCVIII (FM Part XV)

In yesterday’s post we invoked the much maligned user vision in the Financial Marketplace’s “Marketplace Interface” of the Preliminary Specification. We want to continue on with the discussion of the scenarios that were being played out in the discussion and specifically what the division of labor and specialization were having in the makeup of the financial marketplace. It would seem that the majority of the costs of transacting within the banking and investment community are fixed. That is there is little a producer can do to offset the costs associated with these services. And they are usually priced as a percentage of the transaction for loans and investments, or service fees based on banking practices that are global in terms of their competitive offering. Therefore the need to leverage these services should be the key to optimizing the value of these services.

Before we go any further we should note that the People, Ideas & Objects Preliminary Specification aligns the seven frameworks of the Joint Operating Committee with the compliance and governance frameworks of the producer firm. This alignment includes the financial framework as we have discussed in this the Financial Marketplaces Preliminary Specification. Having the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks aligned permits the speed, accountability and innovativeness that we are seeking in the oil and gas industry. Therefore the probability that a Joint Operating Committee will be using the Financial Marketplaces “Marketplace Interface” is a certainty.

Offsetting as much of the logistical and transaction related costs associated with the banking and investment management to the banks and investment managers will enable this marketplace to operate more efficiently. Imputing that the division of labor and specialization will fall within the domain of the bankers and investment managers, and the fee for their services will be one charge for that service. From a paper by Harvard Professor Carliss Baldwin.

The user and Producer need to deploy knowledgeable in their own domains, but each needs only a little knowledge about the other's. If labor is divided between two domains and most task-relevant information hidden with each one, then only a few, relatively simple transfers of material, energy and information need to pass between the domains. p. 17

and

Placing a transaction - a shared definition, a means of counting, and a means of payment - at the completed transfer point allows the decentralized magic of the price system to go to work. p.22

By leveraging the marketplace in this manner helps to mitigate the increased logistical load on a producer as a result of the many Joint Operating Committees undertaking their own banking and investment management needs. This leveraging, and the aid of Information Technology, make this a minor irritant when compared to the benefits achieved when the financial framework is aligned with the other six frameworks of the Joint Operating Committee and the governance and compliance frameworks are also aligned. (Speed, Accountability and Innovativeness vs. a minor logistical irritant.)

The most significant fact about this system, is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on... Frederick Hayek (1945)

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCVII (FM Part XIV)

Within the Financial Marketplace module of the Preliminary Specification we are providing the innovative oil and gas producer with the capability to finance their operation at the speed of their innovativeness. Therefore it is necessary to accelerate the pace and speed of the financial community in terms of their capabilities in understanding the producers business.

The first thing we want to do in this the fourth or capabilities pass of the Financial Marketplace is to start the “Marketplace Interface” for this module. Just as in the Petroleum Lease Marketplace module, the Financial Marketplace will use the user vision to create a virtual instance of the financial marketplace that exists. This will be of the banking and investment communities that we have discussed earlier in this module. Creating an environment where the marketplaces capabilities in terms of banking and investment dealing are made available to the producers through a “Marketplace Interface”.

Within the “Marketplace Interface” producers will be able to engage banks to conduct the banking that they do today. The interface will provide the medium of communication and transaction support that is currently available in two separate medium. With the user vision focused on your bank and their representatives, all of your banking documents that you have with the bank are available to you in the tiles that populate your screen. The items that are outstanding or at issue with the bank are also populated in other tiles and are a simple click away from your full attention. You are able to resolve the outstanding issues and transactions with the bank and move your focus on to the next group.

While still at your desk, the next area of your focus is the investment group that you have been working with on a financing in your firm. They have been undertaking a review of your firm and have some detailed questions of you and your representatives to answer. Those representatives are available and are brought into the virtual meeting and are recorded for the archives. It would seem that the investment group want to take your firms offering on speculation and would appreciate it if you would increase it by 30%. Such is the way for innovative producers.

The point of the “Marketplace Interface” is to provide a virtual environment that accelerates the pace of the producers financial capabilities. If the producer and Joint Operating Committee are to pursue the oil and gas marketplace in the future then the pace of their operations will most certainly have to accelerate. The demands for more energy will be insatiable. The prices realized by the producers will reflect this demand and those prices are rewarding enhanced innovation. It is therefore necessary to ensure that the producer has the capabilities within the financial communities to finance this level of activity. We will be discussing these capabilities further in this the fourth pass through the Financial Marketplace of the Preliminary Specification.

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

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