Oracle Changes the Game

Last week we saw a game changing decision in the Oracle vs. SAP court case in California. A court decision in which Copyright and Intellectual Property are upheld as the key to the software business.

People, Ideas & Objects has been based on the Copyright and Intellectual Property of the Preliminary Research report of using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. This original idea has been developed further in this blog and applied in the development of the Draft Specification. Intellectual property that is original, pristine and designed to solve the issues that exist in the oil and gas industry.

Customers of software vendors need to have their software applications with this level of Intellectual Property and Copyright pedigree. I am pleased to be able to provide our potential oil and gas customers with this high level of assurance of Intellectual Property.

Oracle vs. Google

Oracle has taken steps to litigate Google’s use of Java on the Android operating system; claiming Google’s use of Java requires payment for the technology. Oracle’s lawsuit seeks to establish that Google’s use violates its patent and copyright. One thing that can be stated about Oracle’s acquisition of Sun Microsystems, is that the adults are now running the show.

Working with Sun Microsystems was frustrating on many different levels. One of the frustrations is there never seemed to be any follow through from the business point of view. They may have built the most advanced technologies, but left the major issues of the business and marketing to chance. Letting the altruistic “community” or “open source” world develop the business.

This statement may appear in contrast to the dedication and commitment of People, Ideas & Objects to its communities. To that I would make the following points. When it comes to open systems, “free” does not mean for nothing. Free or open source systems leave the overall leadership or guidance of the product in the hands of the community. That the community is free to discover the correct direction for the product. People, Ideas & Objects has put the product direction in the hands of the user, producer and Community of Independent Service Providers. The business of how our communities will survive in the long term follows a similar strategy to what Oracle is employing.

In Sun’s “altruistic” management of their communities they left the business aspects of their technologies to find their own way. The community needs to be supported financially. Without the financial resources, there is no sustainable viable long-term community that will survive. Leaving the communities financial resources to the whims of whether Google would pay or not is foolhardy. Now that Oracle is monetizing these Intellectual Property assets, the Java community will prosper.

With that stated, it is important to note that People, Ideas & Objects have budgeted for all of Oracle licenses, including Java. These are being paid on behalf of our users, producers and Community of Independent Service Providers. At no time will users or producers be expected to pay Oracle directly, or be subject to any Oracle litigation with respect to their use of the underlying Java or Oracle technologies used in People, Ideas & Objects software applications.

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Intellectual Property Management

On Monday we noted the overall decline in global oil production. As we proceed with the commercialization of the Intellectual Property (IP) that defines this software development project. It is important to point out the nature of the Intellectual Property that is part of the People, Ideas & Objects^TM software development capability and offering. There are two critical areas of concern where the producers should focus on.

1. Ensuring that they are participating within the authorized industry initiative as represented by this IP. As these provide the consolidation of the industry initiative and represent an investment by each producer firm.
2. Ensure that they are not dealing with an un-licensed and non-authorized software development team or community. As these avenues offer no future for the producers investment.

Participation with an unauthorized firm is at the producers sole expense. Producers concerned with the validity of an individual, group, community or firm may email me for further clarification. Every attempt to identify any individual, group, community or firm that are un-licensed will be made by People, Ideas & Objects. Licensed providers are clearly listed on our internal wiki.

Society is put in peril when world oil production declines. There is evidence that the worlds oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production . Management of the industry are conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here. 

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Douglas North Chapter 1

Taking a short break from our review of Professor Langlois. I noticed that a new and interesting book has been published. The book is "Understanding the Process of Economic Change" by Nobel Prize winning economist Professor Douglass North. I took the opportunity to download the first chapter and I highly recommend the entire book, however, at this time we will only be covering this first chapter in our review.

If there is one word to summarize what People, Ideas & Objects is about, it's change. Moving from the bureaucracies that control the industry today. To a newer more innovative footing as represented in identifying and supporting the Joint Operating Committee. Brings about a significant scope of change in the oil and gas marketplace. How this change is implemented is of great concern to me. Making sure this process is focused on the new innovative footing, and not on the bureaucracies needs is a difficult dynamic to manage. Specifically we can't be concerned with the day-to-day of the industry. These day-to-day concerns are for the bureaucracy to manage for the time being. We can not be constrained by the difficulties that constrain the bureaucracy. People need to approach this project with fresh thinking that is free to be as it should be. This unfortunately makes my life infinitely more difficult, however, we are close to securing some funding. And that funding will be from the appropriate resource, the oil and gas investors and shareholders. Selling out to the bureaucrats at this point would be very destructive in terms of ensuring that we are not constrained by the bureaucrats.

We have also been mindful of how individuals approach People, Ideas & Objects. Mindful to ensure that there is a strong break from the day-to-day to ensure they don't bring their cognitive and motivational paradoxes with them from their day jobs. These paradox defined in 1998 by Carroll and Rosson were spelled out in an appendix to the Preliminary Research Report and are noted for the following.

The “motivational paradox” arises from the production bias. That is, users lack the time to learn new applications due to the overwhelming concern for through put. Their work is hampered by this lack of learning, and consequently productivity suffers.

The “cognitive paradox” has its root in the assimilation bias. People tend to apply what they already know in coping with new situations, and can be bound by the irrelevant and misleading similarities between the old and new situations. This can prevent people from learning and applying new and more effective solutions.

In the first paragraph North provides us with an understanding of where we are and the significance of the times at which we live.

UNDERSTANDING economic change including everything from the rise of the Western world to the demise of the Soviet Union requires that we cast a net much broader than purely economic change because it is a result of changes (1) in the quantity and quality of human beings; (2) in the stock of human knowledge particularly as applied to the human command over nature; and (3) in the institutional framework that defines the deliberate incentive structure of a society. A complete theory of economic change would therefore integrate theories of demographic, stock of knowledge, and institutional change. We are far from having good theories of any one of these three, much less of the three together, but we are making progress. The central focus of this study, and the key to improving economic performance, is the deliberate effort of human beings to control their environment. Therefore, priority is given here to institutional change, with the consequent incentive implications for demographic and stock of knowledge changes; but there is no implication that such an approach deals adequately with the latter two. p. 1

Clearly we have much to learn in terms of how best to approach the development of these systems. The other day I noted that we risk becoming blind sleep-walking experts in the hands of whoever wants to feed us. (Habermas) And this is reiterated by North. To "improve the economic performance" of the oil and gas industry requires that we deliberately exert effort to control our environment. I believe, if we continue in the fashion of the bureaucracy, that the world oil production will begin a serious decline in deliverability. Then we will realize, that some of the tasks that we need to occupy ourselves with are beyond those that are parsed out by managements budgets. North details the impact that existing constraints can have.

The structure we impose on our lives to reduce uncertainty is an accumulation of prescriptions and proscriptions together with the artifacts that have evolved as a part of this accumulation. The result is a complex mix of formal and informal constraints. These constraints are imbedded in language, physical artifacts, and beliefs that together define the patterns of human interaction. If our focus is narrowly on economics, then our concern is with scarcity and, hence, competition for resources. The structure of constraints we impose to order that competition shapes the way the game is played. Because various kinds of markets (political as well as economic) have different margins at which competition can be played out, the consequence of the structure we impose will be to determine whether the competitive structure induces increasing economic efficiency or stagnation. Thus well-developed property rights that encourage productivity will increase market efficiency. The evolving structure of political and economic markets is the key to explaining performance. pp. 1 - 2

If well developed property rights that encourage productivity will increase market efficiency, I think People, Ideas & Objects achieves the appropriate institution of those rights. Here I am talking about the Intellectual Property (IP) rights of the people that are associated with this project. I as the copyright holder to the ideas expressed here and in the Draft Specification license those participants in this project with unencumbered use of this IP. In turn, the derivative ideas generated in the development of the applications is essentially sold back to me, where in turn they become available to everyone in the community that has signed the license. This maintains the IP in its pristine condition and is available to all that need it. The license also provides members of the Community of Independent Service Providers with the rights to build a service based offering that is associated with the People, Ideas & Objects software applications.

North provides us with an understanding that we need to be ever vigilant in terms of these concerns.

While the uncertainty that pervades our existence may be reduced by the structure we impose, it is not eliminated. The constraints that we impose have, themselves, uncertain outcomes reflecting both our imperfect understanding of our environment and the equally imperfect nature of both the formal rules and the informal mechanisms we use to enforce those constraints. p. 2

I am unsure at this point if there will be a second post on this chapter. I have downloaded a number of Professor North's papers and we will review those for applicable content. I have also set up a "North" label so these posts can eventually be aggregated.

This book is a study about the ceaseless efforts of humans to gain greater control over their lives and in the course of that effort continually confronting new and novel problems to solve. It is a study of the perceptions that induce institutional innovation intended to reduce uncertainty or convert uncertainty into risk. It is also a study of a continually changing human landscape. This landscape poses new challenges, as a consequence of which policies emanating from “non-rational” explanations frequently play a part in the structures we create. p. 2

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

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Langlois, Economic Institutions Part I

Next up in our review of Professor Richard N. Langlois work is a paper he wrote in July 2009. "Economic Institutions and the Boundaries of the Firm: The Case of Business Groups". This paper provides another interesting perspective on how businesses within an industry can be organized. In our review of "Innovation Process and Industrial Districts" we learned of the close approximation of Langlois "Industrial Districts" (ID) and Professor Carlota Perez' Small Knowledge Intensive Enterprises (SKIE) to People, Ideas & Objects Community of Independent Service Providers (CISP). How ID's, SKIEs and the CISP were a direction that the industry should move toward building and supporting. In this paper we learn of Business Groups and their application. Business Groups are more common in the developing economies, however, I think that they have some important attributes that we can learn from. These Business Groups are best described in this paper by Koo Cha-Kyung a former chairman of the well known LG Group:

My father and I started a cosmetic cream factory in the late 1940s. At the time, no company could supply us with plastic caps of adequate quality for cream jars, so we had to start a plastics business. Plastic caps alone were not sufficient to run the plastic molding plant, so we added combs, toothbrushes, and soap boxes. This plastics business also led us to manufacture electric fan blades and telephone cases, which in turn led us to manufacture electrical and electronic products and telecommunication equipment. The plastics business also took us into oil refining, which needed a tanker shipping company. The oil refining company alone was paying an insurance premium amounting to more than half the total revenue of the then largest insurance company in Korea. Thus, an insurance company was started. This natural step-by-step evolution through related businesses resulted in the Lucky-Goldstar group as we see it today. (Aguilar and Cho 1985, p. 3.)

Notice that the “natural step-by-step evolution through related businesses” involved both spreading excess resources over similar activities and calling forth dissimilar complementary activities. p. 10

The process being described in the LG example is one of "Gap Filling" as is described below.

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

In the example that I posted on Friday entitled "Transaction Design" it was noted the need to have the producers work with a group of engineers to bring about an innovation to enhance the industries capabilities. How the oil and gas producers, with 100% of the revenues of all industries associated within oil and gas, need to develop and maintain the industries capabilities within the ID's, SKIEs or CISP. This is "Gap Filling" as described in the paper.

Oil and gas is certainly a sector that is undergoing systemic change. And we are witnessing the oil and gas companies expectation that field level innovations will spontaneously exist, yet expend none of the money necessary to bring those innovations to market. In their opinion that is the responsibility of the investment capital groups. Well let me be the first to explain to the oil and gas companies management, the investment capital groups became tired of the thumbs down they received for any and all efforts that they undertook. They have left the industry, and I would suggest will not be back. Expecting others to fulfill your needs when you need them, without financial support, just isn't going to work.

This same issue is the paramount issue that People, Ideas & Objects is facing. With no support from the industry, how and why would anyone get behind this project on a speculative basis? Management have made their opinion known and are clearly uninterested in sponsoring a competitive means to manage the industry. What is clearly necessary in 2010 is not only the ID's, SKIE's and CISP. But also the market supporting software necessary to identify and support the market. Without People, Ideas & Objects any attempt at organizing the development of further capabilities will be futile. And that is why management have refused to fund these developments.

The underlying assumption, normally unspoken, is that relevant background institutions — things like respect for private property, contract law, courts — are all in place. Whatever transaction costs then arise are thus the result of properties inherent in “the market” itself, not of inadequacies in background institutions. There is generally a tacit factual or historical assumption as well: that the relevant markets exist thickly or would come into existence instantaneously if called upon. p. 3

In thinking through the points of discussion that have been raised in the past few weeks. I notice that something is missing that is critical to making the ID's et al work. What is the motivation in spending the time and effort necessary to make producers reserves and production more prolific? There has to be something in it for the one that is developing the science or innovation that will sustain them above and beyond the producers desire to have the capabilities. That is the Intellectual Property belongs to the individual or group that developed it. In the example that I provided on Transaction Design, the IP would be the property of the engineers. This is the manner that the Draft Specification in the Knowledge & Learning, Resource Marketplace and Research & Capabilities modules provides.

I have implied this handling of IP in many of the previous posts. I am now stating it explicitly. The only way that the oil and gas industry is going to solve the scientific and engineering problems that it faces is through those with the ideas earning the rights to those ideas. I have consistently argued that the producer firms are focused on their competitive advantages of their oil and gas assets and the necessary earth science and engineering capabilities applied to their assets. This applies to where ever those capabilities are located. How a firm may manufacture drill bits is of absolutely no concern to the producer firm that purchases or rents drill bits. The same can be applied to all aspects of the industry.

This management of Intellectual Property is counter to the attitudes present in the oil and gas industry. Until, and only when, those that do the hard work of solving the problems in oil and gas, earn the rights to their efforts, will we move forward from here. Intellectual Property rights must reside within the firms and individuals who make up the Business Groups, ID's, SKIE's and CISP.

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

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Langlois on Chandler Part II

Part II of our review of Professor Richard Langlois' paper "Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History". Today's post looks at capabilities development from an evolutionary point of view. Langlois notes his and Chandler's preference is to focus on evolution in the development of the firm and markets capabilities. One of the major problems with moving to use the People, Ideas & Objects Draft Specification is the radical or revolutionary nature of the necessary changes. The way in which most firms are operated today is substantially different then what is contemplated in the Draft Specification. In this post I argue these changes are evolutionary and bring the oil and gas producer closer to its more natural form of organization, the Joint Operating Committee (JOC).

During the 1960's systems capabilities were limited and their applications were quite crude. Organizational developments were therefore constrained by the limitations in Information Technologies. The focus of systems development was the firm itself, and that focus was driven primarily by the compliance and governance requirements of firms (Accounting, Tax, Royalty, SEC etc). The Joint Operating Committee was secondary to the demands of the compliance and governance frameworks of the firm. This systems thinking grew over a period of time in which it included several generations of people. Through this process the administration of oil and gas became more oriented to the compliance and governance frameworks and conversely more withdrawn from the five frameworks of the JOC.

It is my opinion that the Draft Specification is not revolutionary in it's move to the JOC, but evolutionary. Particularly from the point of view that we are moving towards the common-sense form of organization. Leaving this systems thinking perception behind is what is necessary for the innovative producer to attain the speed of operations necessary to compete in the oil and gas industry. Langlois notes;

Drawing on many of these ideas, Paul L. Robertson and I have proposed an evolutionary theory of what we call business institutions, that is, of markets, hierarchies, and the many hybrid forms that live between and around markets and hierarchies. What drives the theory are the costs faced by various business institutions of acquiring economic capabilities suitable to the profit opportunities they face. p. 360

With the escalating scientific demands contained within each barrel of oil, the key constraint is the number of earth scientists and engineers. Can we increase the volume of these key individuals at will? Of course not, and with the potential retirement of the senior levels, this issue will only become more acute as time passes. The Draft Specification deals with the limited engineering and earth science resources by addressing the bureaucracies need to develop 100% of their capabilities in-house. These silo's of capabilities built within each firm are designed to deal with every possible contingency. The building of individual silo's within each firm introduces a redundancy that is unaffordable in the current and future oil and gas industry.

There is also the issue of the means of organization of these resources. The hierarchy provides for an advanced division of labor, however, what is needed to expand the economic output of the oil and gas industry is a more detailed division of labor. The Draft Specification deals with the earth science and engineering demands by using the Information Technologies to pool the technical resources of each producer represented in the JOC. These technical resources are further enhanced by enabling a greater role of the service industries to provide a dynamic capability through the marketplaces that support the innovative oil and gas producers. These are reflected in the Draft Specification's  Military Command & Control Metaphor, Resource Marketplace, Knowledge & Learning and Research & Capabilities modules.

Please note as well, the Draft Specification places Intellectual Property (IP) development for the industry in the hands of those with incentives to earn their benefits. The producer firm's competitive advantage is derived from their asset base and application of the firm and markets scientific capabilities to those assets. Development of the IP necessary for multi-lateral fracing and other innovations is best left to the market. A market where those that have the ideas will benefit from their development. Simply the scientific issues that face the industry will not be resolved by a bureaucracy. The difficult and timely effort necessary to develop an idea will only be undertaken by those that deem some benefit in doing so. The Draft Specification therefore respects the IP rights of individuals and corporations that are able to expand the scientific capabilities of the oil and gas producer.

Professor Langlois notes three factors are important. Application of this framework to the methods used in the Draft Specification will provide an understanding of the choices that were made.

1. The pattern of existing capabilities in firms and market. Are existing capabilities distributed widely among many distinct organizations, or are they contained importantly within the boundaries of large firms? p. 360

2. The nature of the economic change called for. When technological developments or changes in relative prices generate a profit opportunity, does seizing that opportunity require a systemic reorganization of capabilities (including the learning of new capabilities), or can change proceed in autonomous fashion along the lines of an existing division of labor? p. 360

3. The extent of the market and the level of development of market supporting institutions. To what extent can the needed capabilities be tapped through existing arrangements, and to what extent must they be created from scratch? To what extent are there relevant standards and other market-supporting institutions? p. 360

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

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Focused on the User

People, Ideas & Objects are focused on the user. The user is the person who works in oil and gas and is involved in the commercial operations of the producer, or Joint Operating Committee they are employed or otherwise engaged by. Whether that is in production, exploration, accounting, legal, land, personnel or any other department or classification that may have been used before. Our primary users hold the tacit knowledge of how the industry operates. One of the many things that we have learned in this blog. Is that tacit knowledge drives software definition. To preclude the user from the software's development precludes success, literally. With People, Ideas & Objects developers, users define and build the software tools they need to employ their tacit knowledge and ensure the producer maintains the most profitable means of oil and gas operations.

There is a second classification of user in the People, Ideas & Objects communities, that of a member of the Community of Independent Service Providers (CISP). CISP's are application specific resources that are generally employed through contractual arrangements with users, producers, JOC's and People, Ideas & Objects directly. CISP's provide services such as help-desk, accounting systems installation and integration, accounting service provider, training, or conference planner, to name just a few, on the People, Ideas & Objects applications.

All users maintain a relationship within the community through the license agreement between themselves and People, Ideas & Objects. Through the license users are provided with unlimited access to any and all of the Intellectual Property (IP) contained within the applications and communities. Access is provided at no cost to the user. This access to the Intellectual Property enables the focus of the users and CISP to be dedicated in an unconstrained manner to the issues and opportunities of the producers and JOC's.

It is through the license between People, Ideas & Objects and the producers that we are able to generate the software development revenues from this IP. Users and CISP's are free to generate income from the associated services they provide with the software. Producers and JOC's who's users use the applications will be required to pay for the use of the software. This is to ensure that the developments of the software and communities are not restricted in terms of what is possible.

One of the advantages of handling the IP in this manner is the producer and JOC's level of collaboration is facilitated around one software development vendor. Having different software applications operating in the industry limits the quality of the interactions between the producers represented in each JOC. These limitations can be seen in the following two expamples. Imagine if Exxon was the software provider, would any other producer be interested in using the applications? Or, if each member of a JOC were using a different software vendors applications, would each participant be able to use the new technologies as effectively as if they were all using the same system? Using one software developer, based on its IP, puts all the producers and users on the "same page" in terms of technical capability.

With the development of technologies, new ways of working together are being developed. As noted here, Sun Microsystems / Oracle has developed Project Wonderland that provides People, Ideas & Objects developments with the ability to have Avatars represent members of the user communities. Users Avatars could be deployed to negotiate agreements in a virtual environment, or deploy clones to actively market an oil and gas property in the Petroleum Lease Marketplace. The point of this discussion is to show the difference in terms of what can be done when applications are dealing in metaphors of Avatars and Marketplaces. For example, yesterday we discussed the new form of economic organization for the oil and gas investor, shareholder or director. The users in these communities are also reflective of this new economic organization.

People, Ideas & Objects are able to maintain their user focus as a result of the uncompromising manner in which this project is financed. Producers pay for the development and use of the software. The software and developments are not constrained by any debt or equity markets that People, Ideas & Objects may have participated in. Ours is an IP based constraint or opportunity. The focus can therefore remain on the user, the producer, the JOC and the innovative nature of the industry. Not on People, Ideas & Objects need to meet the next quarters reporting requirements.

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

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McKinsey The Next Step in Innovation

The creation of knowledge, products, and services by online communities of companies and consumers is still in its earliest stages. Who knows where it will lead

Hey that's us! McKinsey have prepared another article that shows they are in the lead in terms of what the future holds for business. This is number 41 in a long line of excellent articles that we have reviewed, and comes as a result of a major redesign of McKinsey's website. Check it out. 

Distributed cocreation is too new for us to draw definitive conclusions about whether and how companies should implement it. But our research into these online communities and our work with a number of open-innovation pioneers show that it isn’t too soon for senior executives to start seriously examining the possibilities for distributed cocreation or to identify the challenges, such as the ownership of intellectual property and increased operational risk, they face in adopting it.

Too late. This community has locked up the Intellectual Property (IP) of using the Joint Operating Committee (JOC) as the key organizational structure of the innovative oil and gas producer. This is to the benefit of all those who provide services to the industry based on the People, Ideas & Objects software. This also takes the point of view that many within the oil and gas industry, oil and gas companies and their suppliers such as accounting firms, have a date with destiny. That much of the ownership of the producing assets and the work done in the service industries will pass to new and faster service providers. What the current market meltdown is saying is that the bureaucracies are no longer able to sustain our way of life and are uncompetitive. They therefore will be forced to liquidate in rapid fashion leaving the People, Ideas & Objects community to pick up the pieces. The users will be the ones providing the human resources and service business, the investors will be able to take ownership of the oil and gas facilities and they will all run on the software designed and developed by this community. At least that is the way I see it with these new rose colored glasses.

While distributed cocreation does seem promising, it isn’t entirely clear what capabilities companies will need (or how they will organize those capabilities) to make the most of it. Many of the answers will become clear as companies gain greater experience with various open-innovation approaches, including distributed cocreation. But a few challenges are already apparent.

• Attracting and motivating co-creators.
  

We are seeing this challenge in many ways today. First its a chicken and egg problem. The financial resources are not in place to pay the people for their time. A critical issue, and one that has to be resolved for this first step. I have opened up the Preliminary Specification to 100 people who wish to contribute. These contributions will be critical in establishing these 100 people as the leaders in this community. A recognition that would provide substantial long term monetary value as their service offerings developed. The symbiotic relationship of everyone contributing to the IP under license, it aggregating in my hands, as I own the original ideas and their expression, and in turn license the whole of the IP back to those individuals who are members of this community. Those that are able to develop their ideas in this community will be able to prosper in their geographic region, no matter how large.

• Structuring problems for participation.

I think to myself at times that I have 50,000 man years of work ahead of me. The sanity soon recovers when I realize I can do it all, or I can do none of it. Since I would only stand in the way I have chosen to leave the entire development in the hands of the community. This is the best place for it and I need to concentrate on securing the resources and needs of the community. The financial resources, the infrastructure etc.

• Governance mechanisms to facilitate co-creation.
  

Communities are productive when they have clear rules, clear leadership, and transparent processes for setting goals and resolving conflicts among members. Sun Microsystems, for instance, developed its Solaris operating system, cocreated with a global community of software developers, in the early 1990s. The company established a board, including two Sun employees and a third member from the larger software community, charged with loosely overseeing the project’s progress. Even then, by the way, the community wanted Sun to relinquish more control.

The leadership must also maintain a cohesive vision, since there is always a risk that community members will “fork” intellectual property and use it to develop their own cocreated product or service. Mozilla, the online application suite distributed by the Mozilla Foundation, was cocreated by a software community. As the programs were being developed, two contributing engineers, dissatisfied with the project’s direction, used the Mozilla code to create the Firefox Web browser. Community leaders eventually made it the primary supported browser.

This needs to be dealt with as well. I am hesitant to suggest anything more then what has been stated in the Security & Access Control module. A governance structure will have to be built in order to make sure that the software product and the communities associated service offerings are developed in the best manner possible. This I think is a key area where McKinsey may be able to help in identifying the means and methods.

• Maintaining quality.
  

More eyeballs has proven to be one of the best methods of ensuring the software code is operational as it should be. How do we ensure that the services that are provided by the community are of a high quality. Well we could spend a lot of time trying to figure that one out, but I think you'll agree that the community service provider is ultimately rewarded through quality service to the producers. It is the producers that will ultimately be responsible for making sure their operations are handled in the appropriate and optimal fashion. The only other key difference is that the time of a community member is best spent 50% with the software developers and 50% with the producer clients. This is an iterative software development project where the innovation of the producers is the key. Therefore we can never stop developing. McKinsey states the following.

Many cocreating online communities assume that “crowds” know more than individuals do and can therefore create better products; as the open-source-software expert Eric S. Raymond has said, “Given enough eyeballs, all bugs are shallow.” It is far too early to know with certainty if this idea holds true across all kinds of products, but a growing consensus maintains that in software development, at least, distributed cocreation is a ticket to quality. A study published in the European Journal of Information Systems in 2000, for instance, noted that “open-source software often attains quality that outperforms commercial proprietary” approaches. What’s more, a December 2005 study published in the scientific journal Nature concluded that Wikipedia’s entries on scientific subjects were generally as accurate as those in the Encyclopædia Britannica. Still, some have questioned these conclusions and the accuracy or insights of the entries on which they were based.

I did mention that this was open source, but I don't think I stated why it is open source. The need for the producers to be able to ensure that their use of the application is as it seems. They need the ability to go to the code repository and review the actual code that does xyz for them to ensure that the software is done right. They cannot run the binary, only I can do that based on the license, the producer can only review the code.

Lessons from communities

Although it is still too early to develop useful frameworks for success with cocreation, they will no doubt emerge over the next few years. Meanwhile, some lessons about how to proceed are coming out of both the consumer and the professional online communities.

This area of communities and their development is new, and as a result of the Internet. How it develops and how to encourage that development will be something that we should consider taking on as a research project within the community. Just a suggestion. McKinsey has some interesting point of view in the following sections.

These numbers suggest that people are more and more willing to participate with companies online and that companies can tap into that willingness today.

Granted many people can contribute in the short term, but this is a long term permenant software development project. And the community itself will fill in the areas that are necessary for the producer to remain as profitable as can be. But the ability to sustain this in the long run is on the basis that the community is compensated for their time and effort in working with the developers and working with the producers. And I am on that job of raising the financial and other resources.

Even the most advanced businesses are just taking the first few steps on a long path toward distributed cocreation. Companies should experiment with this new approach to learn both how to use it successfully and more about its long-term significance. Pioneers may have ideas about opportunities to capture value from distributed cocreation, but fresh ones will appear. To benefit from them, companies should be flexible about all aspects of these experiments.

Technorati Tags: People's development IP McKinsey Community

The Future of Capital.

Bruce Nussbaum who writes the "Innovation Design" blog for BusinessWeek has a fascinating article on the effects of the soon to completely collapse Wall Street. Entitled "Congress Readies to Vote on the Financial Package -- Get Ready for the Post-Wall Street World." Of which I encourage that type of thinking, I also recommend subscribing to his blog as it is always rich and strong with content. The starting paragraph of the current Rotman school magazine frames his point of view quite nicely.

BY THE DAWN OF THE 21ST CENTURY, a revolutionary change had taken hold in the realm of value creation: physical and financial assets were no longer the key factors of sustainable competitive advantage. Instead, leading companies like Dell, GE and Procter & Gamble depended on superior human and knowledge assets for their competitive edge. p.3

I have, and always will, assert that Intellectual Property (IP) is the only thing of value in the new 21st Century Organization. Either you own or have access to IP, is something that should be the first order of building a "new" business offering in your chosen field and industry. This is why my attitude regarding the Wall Street problems is to let them fail. As Professor Carolta Perez says, financial capital has done its job. It built the Information & Communication Technologies, now product capital has to rise out of the ashes of the financial capital industry. Financial capital is a badly over built industry that is primarily redundant to the needs of the world. When you see the panic that is occurring and understand that productivity in the U.S. is up in the second quarter by 4.3% on an annual basis. You see the dichotomy of the world in which we live. The old is collapsing like the former Soviet Union, and the new economy is now big enough and strong enough to lift all boats.

I’ve said it before: business people don’t need to understand designers better; they need to be designers, designing organizations in which capital of all types wants to congregate. As evidenced by the work of our own Richard Florida, their role is not unlike that of the mayor of a great city, who creates an environment in which multifaceted communities can all agree on one thing: that they wouldn’t want to be anywhere else. p.3

The entire magazine is devoted to these concepts. I highly recommend downloading the magazines from the Rotman school. As I read these three latest issues I may find more valuable information that I will post up on this blog.

Technorati Tags: People's IP Community Trends Innovation

How will Oracle and SAP approach the oil and gas market.

Oracle and SAP have their systems installed in many of the top oil and gas producers. Encana for example uses a variety of Oracle products, which I believe include J.D. Edwards and PeopleSoft. Makes you wonder why are they're hiring developers to build their OilCo and GasCo consolidation software?

One of the critical competitive advantages that we currently have in People, Ideas & Objects is that we are not constrained by the existence of operational software code, and customers operating from that code base. Moving in the direction that the users want and need have no consequences in terms of time, money or effort. Change is dynamic at the beginning of the project and therefore, it is important to consider as much as possible for inclusion into the preliminary through to final specifications.

SAP and Oracle have to look at the oil and gas marketplace with the idea that they have successfully sold the application in the marketplace. What is their upside in terms of new revenue sources? What type of application can be sold into the market, and specifically how would it compete with this People, Ideas & Objects user driven initiative? What mode of organizational structure would be used to model the innovative oil and gas producer? I can only think of the bureaucracy and the Joint Operating Committee. Since this project holds the intellectual property of using the JOC, they are precluded from competing on that basis. SAP as I have said many times before, is the bureaucracy. And therefore any justification to replace Oracle or SAP's current software applications would need to address how it's not a waste of time, money and effort.

Please note this decision to replace the application is at the discretion of the users of this project. If they decide tomorrow to scrap the project and start anew that is fine with People, Ideas & Objects. We are not selling a software application over and over again. Our revenue is based on our Intellectual Property, the cost of developing the application and a percentage for maintaining and profiting from our development capabilities. The costs of this development is therefor substantially lower then the aggregate revenue streams of our competition. 

Which I guess that leaves two options for a producer that wants to shed their bureaucratic ways. Either pool the industries financial resources in the People, Ideas & Objects application, or hire a few hundred developers each to do some custom in-house work. The latter probably makes the least sense when we consider the current bureaucracies are faced with declining reserves and production, increasing debt loads, quarterly losses and retirements of the brain-trust. But then I am rather biased about that.

This project has to find new sources of money and leadership to fill-in the many voids of the overall vision. If you know of someone who could help to financially support this project please do what you can to bring their attention to this. Ninety-five percent of the ownership of the oil and gas industry is held by individuals. Individuals who are the investors, users and developers of the People, Ideas & Object application. Join me here and lets build this software.

The PayPal button on this website will gladly take donations that can further us along in the road we are headed. Even if you can only contribute $10.00 we will be that much further ahead. Join me here.

Technorati Tags: People's Ideas IP Development

McKinsey Mobilizing Minds

During the writing of the Research & Capabilities and Knowledge & Learning modules I have stumbled across a McKinsey document that I should have reviewed back in 2006. Clearly this document has had significant influence over my thinking during the time I set out to define the draft specifications. The article is titled "The 21st Century Organization" and they have recently expanded the article into an excellent book called "Mobilizing Minds: Creating Wealth from Talent in the 21st Century". The information that I am looking at in this post is from Chapter 1 of the book. I have also reviewed the document in the Research & Capabilities and Knowledge & Learning module specifications.

One of the reasons that I am so confident in this project is, first of all, the need as reflected by the oil and gas prices. Secondly the effect that Information Technology is having on releasing the constraints within companies and industries. We are in a period of time where anything can be accomplished, and if done properly, with the People leading the way, we can solve these problems.

It was Professor Ludwig von Mises who noted that the industrial revolution was the solution to the problems of the day. I believe the Information Technology revolution is the solution to the problems of today. This book, which originated from the McKinsey article, speaks clearly to the time and place we find ourselves in.

Ask any mid-level professional or manager at almost any large company - even a successful one - and he or she will tell you that the growing complexity of work is becoming a greater and greater problem.

Starting off with a clear statement of how congested and constrained our traditional organizations have become.

One survey by the research firm Net Future Institute (NFI) showed that nearly 75 percent of senior managers consider the workload of people in their department to be too heavy. Another survey by the same firm found that most people do their best business thinking not while at work but while commuting to work or in their home. Why? Because that's when they finally get some time to think.

The problem in oil and gas is that the organization that brought us to this point in time can not deal with the complexity of the current business. The best term I have heard is that the easy or cheap energy era has ended. The firms as they stand have provided commercial volumes of energy to the markets for many years. When oil was valued at $9.00 to $22.00 a generations worth of time had past. The constraints of change and the complexity of the business are catching up to a generation of neglect in building the business. What brought us to this point is inadequate for our needs. The traditional Schumpeterian creative destruction has been delayed in this industry because of the current earnings of the producers. But if you listen closely, they are claiming their costs are inching towards the point where the bureaucracy will not be able to earn anything from their production.

The People who have worked in this industry are the ones that need to lead the changes in these organizations. These companies will never exercise the level of change that is necessary to bridge this new energy era. Are we to wait for this industry to turn to ashes before we are motivated to make the necessary changes?

The increasing frustration of the workforce is symptomatic of an even more fundamental issue: the organization of most companies today - and how it limits the ability of talented people to perform and take full advantage of the opportunities of the 21st century. The modern, "thinking" company should be a fluid and fast moving creature, in which its workers discover knowledge and exchange it with their peers collaborating with others to create value.

In many ways the industry is not just dealing with the difficulties of the business they are in, they also are faced with a "better way" to do their work as offered by IT.

The problem, however, is that most of today's large companies fall well short of creating conditions that maximize the productivity of their thinking, problem-solving, self-directed people. Too bad this thinking machine isn't working nearly as well as it should be.

And here is the paradox that most people face. The technology provides the opportunity to move to a "thinking, problem-solving, self-directed people" but also locks them into the traditional ways of the organization. As I have mentioned many times before "SAP is the bureaucracy".

Much of the communication is worthless noise: In a 2005 survey conducted by the McKinsey Quarterly, of senior and top executives, 60 percent said their company's size and complexity have made it somewhat difficult, or much more difficult, to capture opportunities than it was just five years ago. Little wonder, then, that ineffective bureaucracies develop within large companies, that the head office seems remote from the field, and that the "left hand doesn't know what the right hand is doing."

As Nobel laureate Herbert Simon stated. "What information consumes is rather obvious. It consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention."

A symptom of the problem companies face today is simply the amount of energy they waste. In the cities the problem is congestion. In companies, the problem is unproductive complexity.

It is opportune at this time to ask what happens next. In oil and gas we see the past leadership holding to the notion that they do not understand why the prices are so high. The fact is the market is allocating the financial resources to these firms to deal with the increased complexity involving the earth science and engineering disciplines. Information Technologies are enabling people within these organizations to do so much more, however, they have no authority to exercise any change. Is this situation to remain in the oil and gas industry for another five years? Or is there an alternative, such as this software development project?

The organization of most companies today bears limited resemblance to the original intended design. While there are plenty of well managed companies that are exceptions, most are struggling: Their hierarchical relationships have become so confused that the power of hierarchy to drive performance is compromised. This dysfunction is usually felt most severely at the front line, where the brainpower and the energy of front-line workers are significantly consumed in the struggle against the internal complexity of their organizations.

This is a software development project that has researched the problems in oil and gas and arrived at a solution to these problems. The five years that I have spent on this research is time that would have needed to be expended, and therefore, I am able to offer the industry the ability to turn back the clock on the past five years and establish this development as a priority.

The fact is that even the most self-directed, brilliant people can't create wealth by working alone. They need help mobilizing the talents of other thinking intensive people and securing crucial capital and labor. They need to be able to convert their thinking into moneymaking activities.

In order to proceed from here requires the People who are doing the work in these organizations to put their heads together and make this application capable of doing their jobs. This mass collaboration could start at anytime and the longer we wait, the longer the problems will fester. The involvement of the People is not something that can be replicated in any other manner. The industry needs to fund these developments and I can not do the work of thousands so time is now being lost.

A new problem

In this book McKinsey articulate further problems that are inherent in the bureaucracy. One that reflects that the lack of motivation to resolve these issues is rewarded by the price driven increases in profits of the producers.

Much of the underlying problem is the use of internal financial reports that do not reflect the underlying economic relationship of intangibles to profit making. Managers can look good on reported results, even as they take actions that hurt the enterprise. These issues are compounded by performance measurement approaches that reward selfish, divisive behavior at the expense of collaborative behaviors for the common good.

Mobilizing Mind Power

What would be the effect of having this software operational in an oil and gas concern? Would using the JOC revolutionize the performance of the science based oil and gas producer?

If your organization can harness this mind power -- if you can boost the profits from each thinking employee -- then your organization will be on the path to great success and competitive advantage in the 21st century world.

and

Most companies are tapping into only a small fraction of the potential to create wealth from the mind power of all the managers and professionals they employ. During the 20th century, the costs of coordinating work across large companies were so large that mind power was trapped in small pockets of people scattered throughout each company. But nowadays this is no longer true. As a result, today there is an opportunity to earn large "rents" (that is, profits disproportionate to the amount of labor and / or capital that are invested.)

Where the Money is

Obviously it is my belief that the changes in organizing the oil and gas industry will provide value to producers, individuals, and society. Alternatively we face a future led by the bureaucracy and its continued failure. Does anyone see how these organizations will survive until 2020?

It would be reason enough to develop better organizing approaches if all that was accomplished was to make the jobs of talented employees more rewarding. All business leaders know how important talent is to their current success. Furthermore, it could be argued, actions taken that will enable companies to attract, develop, and reward talent bring their own reward. Still, we believe developing a better organizing model is more that that. In the 21st century, its where the money is.

What I think is a critical component of this development is a refocus on the competitive advantages of the oil and gas producer. The land base and physical assets are the producers' competitive advantages. As I indicated in the Research & Capability module the intellectual property of how things get done is transferred away from the producers to the vendors, suppliers and People working within the industry. That is their competitive advantage and hence their motivation to develop the most advanced drill bits, rigs, etc. The producer does not have the scale and scope necessary to fully develop the idea, or the application to make the idea commercial. So lets stop playing the game of no one earns any intellectual property because the industry holds all the money. The producers have to actively spend the resources necessary to fully develop the support industries that will make the energy producer the most innovative and profitable. We won't get there if the intellectual property is passed around to the vendors competition by the producer firm. And that also applies to this software development project.

Because of the development of globalization and advances in technology, scale and scope effects have increased across the board -- particularly in those effects related to intangibles. By "intangibles" we mean such assets as the brands, intellectual property, and proprietary networks that are unique to individual firms.

If we don't allow the ideas that are a critical part of an innovative science based industry to be developed where and when they are needed, we will be stuck with the problems of the 20th century. The clock is now ticking.

The opportunity is to bring the entire firms [industries] mind power and the related intangibles to every job, to increase the value of every person's work, every day.

and

We are arguing that companies need to view investing in designing and building strategic organizational capabilities as means to capturing rents from everything they do. Companies are being constrained, unnecessarily, by the unproductive complexity of working in their organizations. We believe that investing in capabilities to relax these constraints, thus enabling a company to mobilize not just labor and capital but also the company's unique mind power, is the key to creating wealth in the 21st century.

and

Furthermore, we truly believe that companies have only begun to tap the opportunities to create wealth in the 21st century. Why? Because they are still using an organizing model designed for the industrial age rather than for the digital age. to create greater wealth in the future, we believe that all companies should make organizational design the centerpiece of their corporate strategies.

Please, join me here.

Technorati Tags: People's, McKinsey, Energy, IP, Organization, User,

Management of IP (Intellectual Property) in oil and gas

I have a few thoughts on how IP is developed and used in oil and gas and why it needs to change, quickly. First, as I have documented in the Resource Marketplace™ Module. The competitive advantage that a producer has is contained within their land and production base. The application of the earth sciences and engineering knowledge, understanding, and capability to their land and production base are the means in which to build value. The IP (intellectual property) is how the market provides the commercial means of building the producers value.

And IP is the markets way of building value and key competitive advantages. The holding of IP within a producer company is redundant, of no value and an impediment to innovation. The market uses the tools of IP to prepare the state of art research and knowledge for its own monetary gain and competitive offerings. In the hands of a producer IP is useless.

What would holding a number of patents on drill bits provide a producer such as Exxon Mobil? Or in this case, the IP of using the JOC as the key organizational construct? Again in the hands of a single producer it makes the ideas unavailable and unusable. In the hands of an entrepreneur it can build value for the entire industry. Neither of these two examples provide the producer with any strategic competitive advantage. Nor does the producer have the economics of scale to make the innovation or research worthwhile. They are not in the drill bit or software businesses.

Until the producers realize the IP is not their competitive advantage, and accept the markets holding of these ideas, the market will not respond to the needs of the producers. If the markets efforts are in vein and the producer just hands over one vendors IP to the next, nothing will develop that is different from today's $138 / bbl marketplace.

Not recognizing the IP of others as a practice will need to change before the producers can begin to approach the market demand for energy. For the past number of years the management of IP by the industry has been catastrophic. Other then the large suppliers such as Schlumberger, BJ and Halliburton's ability to file for patents. Most of the IP has been ignored by the producers so that they do not have to grant the monopoly rights to the technology developer. Since the energy industry is a primary business and 100% of the resource value is received by them, does not mean they can strip, cherry pick, abuse or otherwise attempt to steal the IP of the market.

Over the past 5 years my personal experience in this area has given me first hand knowledge of the depths of stupidity the companies taken the concept of IP ownership. This must stop for the betterment of society. If we continue in the fashion that we have, we will never be able to meet the markets demand for energy.

Central planning is dead, long live the market.

Technorati Tags: People's, IP, Market, Research,

Draft Specification - Resource Marketplace Module

“For every serious challenge facing the world. There is someone with a big idea. That big idea needs to be nurtured. It needs to be explored and analyzed in order to bring it to life.

And design is at the core of that innovation. There isn’t a problem in the world that a great designer can’t solve.” Quotation from an Autodesk commercial.

The Resource Marketplace module is the second of three marketplace modules in the People, Ideas & Objects specification and the fifth of eleven. The key focus of this module is on providing a forum for electronic commerce. The Resource Marketplace works with the Accounting Voucher Module to optimize the contract, division of labor and mitigation of transaction costs.

A summary list of the published modules.

Draft Specification - Security & Access Control Module

Draft Specification - Petroleum Lease Marketplace Module

Draft Specification - Partnership Accounting Module

Draft Specification - Accounting Voucher Module

Draft Specification - Resource Marketplace Module.

Possibly the largest impact of this module is the management, with the Research & Capabilities Module, of People's Intellectual Property (IP). If we are to succeed in finding larger volumes of energy to meet the worlds demands we are going to need to solve a variety of difficult problems. Whether those problems are in engineering, science or business the individuals that will ultimately prevail need to be motivated to do this difficult work. The motivation is the ability to earn the rights to the expression of the idea, the patent or trademark.

For more then 25 years the oil and gas industry has ceased to conduct any research. Making today's environment ripe for research and development opportunities and making it a use it or loose it proposition. Since they chose to do nothing they won't miss out on any opportunities. In this module specification I also suggest that companies have become too comfortable with using People's IP as if it was free like the oxygen that we breathe. The "Ideas" in People, Ideas & Objects is explained in fair detail in the specification. It is necessary to build a system where people can develop, secure, license, contract and manage their intellectual property. This application is the place where that will happen, have a look.

The next Module to be published will be the Financial Resource Marketplace.

Technorati Tags: People's, Specification, Development, IP, Modularity,