The Preliminary Specification Part XLI (K&L Part I)

We now move onto the Joint Operating Committee focused Knowledge & Learning module of the Preliminary Specification. This module shares many similarities to the Research & Capabilities module, and in fact is populated with the information from that module as its base of information. Recall that the objective that we are working to achieve is to move the knowledge to where the decision rights are held.

As I noted in yesterday’s post, the Research & Capabilities module should be organized based on geologic zones. This is so that the information that is pertinent to each zone can be separated into its own “packaging” within the Knowledge & Learning module. Additional ways in which data may be sorted in the Research & Capabilities module might include by geographical location. Where all the vendors who operate within a certain geographical location are referenced only in those regions.

With each Joint Operating Committee being concerned with one or a handful of geologic zones. The focus of the Joint Operating Committee can be limited to just those specific areas. What is particularly different about the Knowledge & Learning module, however, is that the information that is contained within the module is aggregated from multiple producers. Any of the producer participants who have information contained within their Research & Capabilities module will have that data and information for those geologic zones populate the Knowledge & Learning module for that Joint Operating Committee.

With the potential to have multiple companies contributions of research and capabilities about that zone. It is important to have the information organized within the Research & Capabilities modules in a manner that when multiple producers data is merged, use of the data is probable. (The old adage garbage in, garbage out.)

This would summarize the manner in which the Research & Capabilities information is populated within the “knowledge” area of the Knowledge & Learning module. Tomorrow the “learning” attributes of the module will be discussed. And on Saturday, I will discuss why we are even talking about these geo-technical and engineering points in an ERP system.

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

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

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.

Technorati Tags: People's Langlois IP Knowledge Learning Market Specification
 

Some uses of Google Wave

I am one of those that became enchanted with Google Wave after I saw its initial demonstration. Few technologies have the potential to be game changers. Applications like email and the browser were in the same class of announcement as Google Wave. That we can implement the application in the People, Ideas & Objects - Draft Specification modules. And use it as a means of collaboration during development, make the application a critical part of our developments. I highly recommend that you view this video.



Several groups have been granted early access to Google Wave. It has been received particularly well by the people who have had access to the application. In a Forbes article, author Dan Woods notes the recent response to the application and the implications to ERP software vendors.

But the flexible collaboration of Google Wave is out of reach for the current generation of enterprise software. In addition, the flexibility and configuration of the data structures offered by Google Wave would make modern SaaS software seem restrictive. This freedom will require governance and a new way of thinking, but that is a topic for another day.

If we look at the Draft Specification, it has the "freedom will require governance" problem. The Joint Operating Committee by definition is represented by many different producers. All of the modules have this fact as a critical aspect of how this application will be able to deal with the unique aspects of the oil and gas industry. The JOC is the cultural means of the industry. The Draft Specification is the only application capable of recognizing and building on these attributes.

The combination of the Security & Access Control Module, Governance & Compliance Module and the Military Command & Control Metaphor are how People, Ideas & Objects provide this "freedom will require governance" model. This is a key point. Unless these attributes are built into the application at the start, then the ability to retrofit a ground breaking application with these attributes doesn't exist, in my opinion. I noted this essential attribute and noted the risk that the industry would face as a result of technologies advancement, without explicit management support, would lead to the leakage of control over the firm. Leakage over the day-to-day and strategic attributes of the firm. As technologies become easier and simpler to introduce, the role of management can be circumvented AND hence their responsibility to make sure this does not happen. As I mentioned in Technologies Darker Side in the Preliminary Research Report, companies were advised of this risk, and I reiterate the risk here and now. If the management of firms remain negligent to this risk, there will be consequences to the investors of the firm.

Please join me here.

Technorati Tags: People's User Video Google Knowledge

Paul Romer on BBC

We have covered former Stanford Professor Paul Romer in this blog before. In fact People, Ideas & Objects is the name that I derived from Romer's new growth theory. New growth theory suggests that future economic growth will be developed from People, Ideas & Things. I simply changed "Things" for "Objects" as we are object based software developers.

Romer is on the short list for a Nobel prize because of his new growth theory. In a related BBC commentary, an excellent summary of his thinking of what "Ideas" are about.

Physical objects are often scarce; economic growth is often limited by that scarcity. Conventional economics is the so-called dismal science, dominated by the law of diminishing returns where businesses compete with each other into their ultimate extinction, capitalism making the rope to hang itself.

Paul Romer disagrees, profoundly. Ideas are what makes the difference, and turn economics into the optimistic science. And in the networked world, in software, in new research-heavy disciplines such as biotechnology, ideas are shared across frontiers at lightening speed and then breed much faster than rabbits.

Needless to say Romer is blogging and providing more substance to his ideas here. His recent post on how certain countries were able to deal with the housing of its citizens is fascinating. Are we destined to learn these same lessons from the beginning again? We would be foolish not to review what works, and where it works, based on the experiences we have to date. That is what Charter Cities is about and I think the lesson is directly applicable to the work we are doing in People, Ideas & Objects software developments for oil and gas.

"There’s a little corner of economics where there still exists a sense of wonder about what is possible."

Please join me here.

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What kind of work?

Lets give some thought to the types of companies that will make up our Community of Independent Service Providers (CISP). Those people that will use the People, Ideas & Objects software application modules in their day to day servicing of their oil and gas producer clients. Those people that will interact with the developers of People, Ideas & Objects to define and build the People, Ideas & Objects applications to meet the needs of their producer clients.

Being a member of the "Community of Independent Service Providers" provides these people with two revenue streams. One being for the services provided to their producer clients. And for their time and efforts in defining and working with the developers. 

The point of this exercise is to build the systems and communities that provide the innovative oil and gas producer with the most productive and profitable means of operation. Lets' for a moment think about this. If the combination of this software and community provide the producer with the most profitable oil and gas operations, is it the ownership of the oil and gas assets that are the most lucrative, or access to the software and community the most lucrative element in the oil and gas business. I think it is the software and community and that is the primary reason that people should join this project and start building the software and the community.

Access to the Intellectual Property (IP) that makes up this system software and community is made through the license that will be signed by each member of the community. This license assigns any IP generated in the development of the application back to me, the originator of the idea of using the Joint Operating Committee. This in turn, through the license is granted back to each member of the community for them to use in an unencumbered fashion. Since all the IP is centralized and made available to everyone we are not subjected with potentially thousands of IP related claims that kill the possibility of this community developing and flourishing. I in turn use the IP to generate the necessary revenues from the producers to pay the community for their work with the developers, and the developers themselves. Producers then are paying for the software and services that the community provides separately. 

On to the subject at hand, what kind of work would the people in the community be doing? I foresee the community being very large. Essentially I do not see the industry employing anyone directly. Each individual may have their own enterprise in which they provide some value added service to the producers. These firms may be single proprietors or larger. Initially I think that all of them will be single proprietors that form as a result of this call for this community. Economically the old ways are being consumed by their failures, we can easily skip this by starting from a blank slate. The types of businesses will be in the areas of expertise you would find in the administrative, exploration and production areas. Or as I said, pretty much everyone.

We have defined in the Draft Specification that the division of labor and specialization will need to be enhanced for their to be a more productive industry. These attributes will have to be determined by the community understanding what is necessary and what is possible. 

I probably have made the understanding of what and how the work will be done in the future a little more confused. It is a future that is not well defined as the input from the community has been very minor up to this point. My responsibility was to provide a workable vision of how I think the industry could and should operate based on the research that I conducted. The knowledge held within the user community will be necessary to optimize the system to meet the objective of being the most profitable means of a producer to manage their oil and gas assets. That is the motivation. The communities purpose is not represented in a one to one agreement that provides individuals with the employment contract. The purpose is to ensure that the community is competitive in its offerings in comparison to any other oil and gas system. This is how the members of the community will earn their living and keep moving the oil and gas industry forward. It is a value based offering, not one that is dependent on the employee - employer concept of "doing a job". Please join me here. 

In this post I am establishing a new Label and Tag for CISP. I will also summarize these thought in a new knol located here.

Technorati Tags: People's CISP Community Innovation Knowledge Strategy

The New Economics of Computing.

Professor Nicholas Carr is a Professor in the business faculty at Harvard. He is probably most famous for his controversial article "IT Doesn't Matter" and the follow on "Does IT Matter, an HBR Debate". June 2003. Since these publications he has written a few books on the topic of IT and writes a blog about the way he sees technology and technology trends influencing business.

He has been talking about the implications of "Cloud Computing" and what the paradigm change means to business, both technical and other businesses. In his recent post he makes some comments about the significance, and an example of how cloud computing does provide real value. (Recall the People, Ideas & Objects application will be accessed through the "Cloud Computing" method.)

My favorite example, which is about a year old now, is both simple and revealing. In late 2007, the New York Times faced a challenge. It wanted to make available over the web its entire archive of articles, 11 million in all, dating back to 1851. It had already scanned all the articles, producing a huge, four-terabyte pile of images in TIFF format. But because TIFFs are poorly suited to online distribution, and because a single article often comprised many TIFFs, the Times needed to translate that four-terabyte pile of TIFFs into more web-friendly PDF files. That's not a particularly complicated computing chore, but it's a large computing chore, requiring a whole lot of computer processing time.


Fortunately, a software programmer at the Times, Derek Gottfrid, had been playing around with Amazon Web Services for a number of months, and he realized that Amazon's new computing utility, Elastic Compute Cloud (EC2), might offer a solution. Working alone, he uploaded the four terabytes of TIFF data into Amazon's Simple Storage System (S3) utility, and he hacked together some code for EC2 that would, as he later described in a blog post, "pull all the parts that make up an article out of S3, generate a PDF from them and store the PDF back in S3." He then rented 100 virtual computers through EC2 and ran the data through them. In less than 24 hours, he had his 11,000 PDFs, all stored neatly in S3 and ready to be served up to visitors to the Times site.


The total cost for the computing job? Gottfrid told me that the entire EC2 bill came to $240. (That's 10 cents per computer-hour times 100 computers times 24 hours; there were no bandwidth charges since all the data transfers took place within Amazon's system - from S3 to EC2 and back.)

My experience with "Cloud Computing" has involved renting processors on Sun Microsystems network.com and Amazon's Web Service offerings. You should set up an account on one of these services to understand the full scope of the power that is offered to the user. If you have a processing problem that can take 100 hours of processing on your computer, hoisting it up on one of these services will not only allow you to process the problem far more cost effectively as Professor Carr points out. But you would also recieve the results for this 100 hour job within a matter of minutes. To me this was the intoxicating aspect of cloud computing.

Go ahead and try one of these web services. If you need help figuring out what type of problem to solve, use this Princeton University book. (Download the first chapter, its free.)

Technorati Tags: People's Interests Knowledge Learning

From transaction processing to transaction design.

To suggest that high levels of transaction processing will be included in People, Ideas & Objects should not be a surprise to anyone. This is standard fare in any system that manages the commercial aspects of an oil and gas concern. The real key in generating value in the oil and gas industry is in the area of what I call transaction design.

First lets get to one of the assumptions that I have used in preparing the Draft Specification. That is, the pursuit of growth within the organization is misguided. The focus of the producer firm is to determine where the value resides. Pursuing value versus growth implies that "activity", where both value is created and destroyed, will be eliminated through tools to design the transactions and their execution. This is done in the Accounting Voucher module of the Draft Specification.

The JOC is the method that the industry uses for all of its operational decisions. This is systemic on a global basis. Yet not one ERP system (Oracle, SAP & others) recognizes the JOC as the key organizational construct of the industry. It is also important to note, as I recently stated, the participants that sit on the JOC are ideally the actual investors that own the property. It will be those that are members of the JOC that evaluate the quantitative and qualitative analysis that supports the decisions being made.


What I am trying to say here is that the muddling of accountability across many organizations and departments leaves no one accountable for the success or mistakes that are made. The source of the bad decision could be in any one of the JOC member companies where analysis of what went wrong is not available to any of the other producers. Not that the idea is to punish people, but to learn from those mistakes and make sure they don't happen again. Mistakes are a necessary part of the innovation process. Without the capacity to analyze the mistakes that are made, will only fuel the same mistake being repeated elsewhere. The same is said for the successful operational decisions. What was it that caused the success to occur is a necessary analysis that should also be completed.

These elements of transaction design have been implemented in the Accounting Voucher module of the People, Ideas & Objects application. The interface elements of the module provide access to the information and resources that reside in the producers that are members of the JOC. This enables those members of the JOC to test and implement their understanding and what new science may have been developed. This is a key focus of how and where the innovation within the oil and gas industry will evolve. As the science increases, more innovative and creative uses of the science will be implemented, leading ultimately to more new science. This incremental looping is facilitated through the Accounting Voucher modules transaction design elements.

Technorati Tags: People's Specification Research Knowledge

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

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

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

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

In his introduction he is very specific as to the type of organizational learning and the dynamic capabilities that an organization can attain.

This paper investigates the mechanisms through which organizations develop dynamic capabilities, defined as routinized activities directed to the development and adaptation of operating routines. It addresses the role of (1) experience accumulation, (2) knowledge articulation, (3) knowledge codification processes in the evolution of dynamic, as well as operational, routines. p. 339

The discussion therefore is not just about the knowledge repositories that we have, but also the speed at which organizational learning occurs. Professor Winter provides a framework in which we can analyze these attributes, defining them as;

Operating routines; Learning processes geared towards the operational functioning of the firm (both staff and line activities).

Dynamic capabilities; as the firm's ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments. p. 340

Dare I ask if it is possible to have this dynamic capability and operating routines inherent in our wiki within the first or second iteration of the Preliminary Specification? That is to say, can we capture the substance of the industries operating routines within the very initial work. And then, have the performance of the activities in our wiki actually impact the way in which the industry operates. Is it possible that, even before we commence the coding of software that these knowledge repositories are the key element in moving the industry understanding forward? I think that is what is being suggested here by Winter as he states.

Beyond theory building, we hope that the present paper provides useful guidance for future empirical inquiry into the role that articulation and codification processes play in creating dynamic capabilities. That is its principal purpose, and although the existing empirical base is thin, we consider that there is already good reason to believe that significant progress in that direction is quite possible. p. 350

and

DEFINITION. A dynamic capability is a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness. p. 340

Based on my understanding of the nature of the idea of using the Joint Operating Committee and those contained in the Draft Specification, our opportunity is not to just document the business within our knowledge repositories, but the ability to travel at a speed and understanding that is in excess of the earth sciences and engineering demands of the producers. Where the difficult questions are asked and with the collective intelligence of this community we are able to move the industry, build the software to support those organizational definitions and provide the producers with these dynamic capabilities.

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

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

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

In addressing why this is done, Professor Winter states:

In a relatively static environment, a single learning episode may suffice to endow an organization with operating routines that are adequate, or even a source of advantage, for an extended period. Incremental improvements can be accomplished through the tacit accumulation of experience and sporadic acts of creativity. Dynamic capabilities are unnecessary, and if developed may prove too costly to maintain. But in a context where technological, regulatory, and competitive conditions are subject to rapid change, persistence in the same operating routines quickly becomes hazardous. Systematic change efforts are needed to track the environmental change; both superiority and viability will prove transient for an organization that has no dynamic capabilities. Such capabilities must themselves be developed through learning. If change is not only rapid but also unpredictable and variable in direction, dynamic capabilities and even the higher-order learning approaches will themselves need to be updated repeatedly. Failure to do so turns core competencies into core rigidities (Leonard Barton 1992).

In the future the oil and gas producer is competing based on their land base, engineering and science based understanding and application, these are the critical skills to have. An innovation based producer that is dynamically generating changes needs to separate the research and implementation of ideas. Idea generation does not need to be present in the JOC. Confusion and mistakes would arise if the two functions were joined. Change and innovation are the constant that will drive the dynamic capabilities in the producer firm. Where the more dynamic the firm, the more innovative and successful.

To somewhat get back to the topic at hand. I started this entry on the basis of the collective understanding and application of knowledge in this blog and the wiki that holds the Draft Specification. This latter information shows how these same principles apply to the development of the systems in oil and gas. The 11 module draft specification is to the oil and gas producer as the blog and wiki are to this community. Winter discusses an important element of how these are achieved.

Opportunity Costs. Conducting debriefing sessions and updating tools after the completion of the task cannot be done too often without diverting attention away from day-to-day operations. A balance between explicit learning activities and execution activities, between thinking and doing, is essential (March 1991, Mukherjee et al. 1999). March et al. (1991) argue that with highly infrequent events, organizations can learn from quasi histories (i.e., "nearly happened" events) or from scenario analysis. Both mechanisms entail a substantial amount of investment in cognitive efforts and, most likely, rely on the creation of written output or on the use of electronic support systems to identify and make all the assumptions explicit.

Making the analogy between the wiki and blog of this software development project, and, the Research & Capabilities and Knowledge & Learning Modules for the producer firm. These are the higher value added processes that make a producer more competitive in the future. These tasks and activities are what would be considered incremental to what the energy companies are conducting today. Almost exclusively focused on the immediate quarter has achieved the optimization of the near term profits. However the focus on execution precludes the ability to generate and build value over the long term. This separation of roles and responsibilities is what the Draft Specification modules are providing the producer.

The point of this entry, I guess, is to suggest that these higher level learning processes are supported and enabled in today's technologies. Whether it is the blog and wiki used in defining the optimal organizational makeup of an oil and gas producer. Or the Draft Specification and understanding that underlays the firms ability to find and produce commercial quantities of energy, technologies role in enabling the higher organizational performance are critical, and I would suggest necessary. Winter suggests;

The framework introduced in this paper, particularly the knowledge evolution cycle and the relationships among learning, dynamic capabilities, and operating routines-constitutes, we believe, a significant clarification of the structure of the phenomena. This inquiry is, however, still in its infancy. We know little, for example, of how the characteristics of the organizational structure and culture interact with the features of the task to be mastered in determining the relative effectiveness of the various learning behaviors.

Basing much of the Draft Specification on the solid research of Dosi, Langlois and Winter provides sound academic founding for using the JOC. I believe I have also made the case that the bureaucratic companies are unable to make the transition to this type of system. As well as the case that the bureaucratic company is failing. The difficult task that is necessary to make the People, Ideas & Objects application modules real is the investors money, and the oil and gas worker. Please contribute to this by selecting the PayPal button to provide the much needed revenue, email me your information so I can send you an invoice, and join me here.

Technorati Tags: People's Winter Organization Execution Knowledge

I knew this was the right path.

Were traveling down a dark and unknown path in this software development project. Much of what has to be discovered and learned is determined by feel more then any blueprint or map. I think this project is 100% on target to be successful in making the oil and gas producer execute its plan's faster and more innovatively. Today we have some proof that we are in the right place and time to achieve the success we desire.

Some research was carried out on the Service Oriented Architecture (SOA) type of software delivery model. Click on the title of this entry to be taken to the research web page. This article suggests the odds are against us with only a 20% success rate in the SOA business model. It also provides a guide as to what we are doing correctly. And I think a clear understanding of where we need to move to in order to achieve the success that we are expecting.

What are we doing right;

Failed SOA projects get too focused on the means rather than the end. The failure to focus on business goals is a problem and focusing on them is the solution. There is sometimes a failure to ask the most basic questions in building the business case for SOA. Why should we be building services? What does it mean at the end of the day?... While one of the business drivers for SOA is reducing costs and achieving return on investment (ROI), ROI for SOA remains an elusive goal and SOA project leaders frequently take a leap of faith where ROI is concerned.

People, Ideas & Objects is about identifying and supporting the industry standard Joint Operating Committee (JOC). Aligning of its financial, legal, operational decision making and cultural frameworks with the compliance and governance framework. Compliance and governance being the sole domain of the bureaucracy, the separation of operational decision making and compliance and governance is a recipe for disaster. Nonetheless, the stated objective of this software development project is to enable;

"This community, using this software in their own service business offering, will be the method and means that the oil and gas producer will conduct its most profitable commercial operations."

This is not about the technology. It is not about project management. Although this project uses these two disciplines to achieve the stated objective. This is about getting the business of the oil and gas producer in alignment with the rapidly changing earth sciences and engineering disciplines. This alignment facilitates innovation and enables the oil and gas producer to keep pace with the changes in the underlying sciences.

and

1. Business and IT reorganization, usually with a new CIO coming on board
2. Sponsorship at the C-level or by the Board of Directors
3. Agile/iterative development methodologies put into place
4. Projects tied to and measured by business goals, not IT drivers
5. Well-defined funding and maintenance models that balance the needs of service providers and consumers
6. A simplified architecture, making it easier to access and manage quality data
7. A culture of trust between business and IT

Here we have a mixture of opportunities and problems. Item #'s 3, 4, and 6 are in place in my opinion. Item # 1, 2, 5, and 7 are hitting on the one area that has caused this project to struggle, money and trust. This may be a short term problem as the community involved in this software development continues its logarithmic growth in the U.S. I fundamentally mis-trust the companies I highlighted in my review of stock based compensation. These little piggies attempt to steal this project from me during September 2003 and April 2004 has left a bad taste in my mouth. As such I will not miss them. I however am willing to fully participate with the U.S. and British based industries and any other region that wishes to participate. We have much to do, and as you may have guessed, I have a driving passion for this project.

With that in mind I am frankly grateful for this next set of recommendations.

• Define the business cases clearly. If you can’t, don’t do SOA
• Empower those who need to drive the systemic change that SOA requires, typically, with the money and the authority to do something. Else, don’t bother. You need to control the money and be able to fire people if this is to work in a reasonable amount of time. Otherwise, you’re in endless meetings with people who have agendas that don’t include rebuilding the architecture for agility and reuse.
• Think long term and strategic, not short term and tactical. It’s okay; things won’t collapse as you move from a reactive to a proactive mode. Indeed, that’s how companies win their markets.
• Start small, but keep the momentum going. Small battles win the war, and little by little the architecture will get better if you just keep moving the ball forward

I have a fear of the issue that these points intimate. We don't need to follow any blind bunny trails and desperately need to keep the focus and tract of development in-line with the needs of the producers. However, we need the resources to build this project. If as I suggested a few weeks ago the scope of this project might be in the billion dollar range, over probably four years. The smooth application of the financial resources over the life of the project is the obligation of the collective group of project sponsors. This project needs to be managed on a basis that delivers the application with these constraints and difficulties in mind. This I will diligently work toward.

Which leads me to reiterate the value proposition of this software development project. The costs of development are allocated to the producers on a "per barrel of oil / day" basis. These costs are incurred plus a percentage of those costs for the project. The costs therefore are a small percentage of what the license costs of SAP or Oracle. Once the project is released in a commercial offering the costs of supporting and further developments will be handled on the same basis.

This article brings out another point that was assumed but never identified or communicated. The SOA model within an oil and gas company doesn't provide the value an industry focused SOA solution does. Does this mean an SOA denotes that it is an industry focused solution? I think it does and it seems this research indicates that conclusion may be valid.

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Two More Draft Specifications

I am pleased to submit to the community the Knowledge & Learning and, Research & Capability Draft Specifications. (Please note these modules are very similar and therefore each file contains both specifications). These are the eighth and ninth Draft - Specifications and I will complete the last two Performance Evaluation and Analytics & Statistics Modules before the end of July 2008.

• Security & Access Control
• Petroleum Lease Marketplace
• Partnership Accounting
• Accounting Voucher
• Resource Marketplace
• Financial Marketplace
• Compliance & Governance
• Research & Capabilities
• Knowledge & Learning

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Copyright issues on MIT Video

MIT Video is hosting a discussion on the topic of copyright. As I have mentioned here before, intelectual property is the most valuable assets on a go forward basis. Copyright, Trademark and to a lesser extent Patents provide their owners with powerful tools to ensure their thoughts and ideas are respected and commercial. It is interesting to see the constraints that are realized by the Professor of these universities are required to consider whether they can even use their own ideas. If the professors previously published their ideas, it seems that most of the publishers had taken the rights to the copyright in consideration of the costs of publication. Now with the desire to let those ideas be heard by a larger, and electronic audience, they are unable to secure those rights from the publishers. In addition to this point regarding overall access their is many other worthwhile points. I would recommend the viewing of the video on this important topic. People need to generally understand these points of law better then they do now.

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Professor Whitesides, on MIT Video

This video has an interesting point of view, one that states the United States will at least be challenged for leadership in science and technology. Professor Whitesides suggests that areas such as K - 12 education need to be amended to accommodate the ways that academia and corporate research are undertaken.

Two of the important points that he suggests is that the Chinese have a very low cost structure. This cost structure extends in all areas of their economy and includes research. Noting the Chinese also have very large foreign currency reserves that could be used to help sustain the long lead times necessary in research. This provides them the opportunity to challenge and possibly lead the world in research and science.

Professor Whitesides notes that energies problems will require science and technologies to advance to solve these issues. I would suggest that this is correct, the problems are many, they are diverse in nature, and are key to a countries competitive position. I have suggested here that the oil and gas industry needs to aggressively employ the sciences in order to meet these challenges. I have also suggested that the tie in to the academic community is necessary. As Professor Dosi has suggested technology influences science, and science influences technology. Industry and academia need to be working together. And to do this effectively I believe industry needs to reorganize themselves for these purposes around the Joint Operating Committee. A bureaucracy will most certainly fail in these critical energy challenges.

The question and answer session in the last half of this video is a must watch as well. The participants for this presentation are the who's who in terms of who is interested in providing solutions to these issues.

Technorati Tags: Genesys, Knowledge, Research, Engineering, Science

Toward an Evolutionary Theory of Production, Part A

Professor Sidney G. Winter, December 2002

With over 2700 words of quotation I am well beyond the fair use doctrine of using Professor Winter's paper. As I mentioned before I will make him whole when I have completed this comprehensive and valuable secondary research. What we have discovered to this point was nicely summarized in the table I published here. The "Production Costs" were assigned to the market with the secondary assignment being to the firm. The topic of discussion at this point is associated with these "Production Costs" however in the form of their interaction and determining the production function. Winter states this nicely in the following quotes, and points to an evolutionary theory of the production process. So the topic of this discussion is deeply related to "Production Costs" although it is more to do with the development of production possibilities based on multiple cost scenarios.

"It should be obvious that evolutionary economics needs to strike quite a different balance. Evolutionary thinking sees questions of production as tightly and reciprocally connected with questions of coordination, organization and incentives. Also, production activity is embedded - now more then ever - in a variety of processes of knowledge creation; theory needs to make room for those links. A major deficiency of the mainstream theory is its isolation from the realities of organizational knowledge. Above all, the evolutionary economy needs theory to address questions of economic change, not the principles of resource allocation in a hypothetical static world." pp. 1

Why we are now discussing the topics of the boundaries of the firm, the Schumpeterian thinking and theory of production is well articulated in Winters argument. What he is essentially saying is the production method chosen may have been selected for other then optimal reasons. That the time frame in which we find ourselves in is an ideal time to readdress these previous decisions, more with an eye to the optimal solution.

"The dominance of the production function apparatus in contemporary mainstream treatments of technological change is also a "Panda's thumb" phenomenon; it reflects the logic of path-dependent evolution (Gould). The apparatus was created and developed for various other reasons, and when questions of technological change came to be confronted it was conveniently available. The inherited apparatus was then extended and supplemented by a variety of formal treatments of technological change, the simplest being the introduction of the multiplicative fact A in the relation Q = Af(x). Negligible attention was paid to the question of whether plausible real-world mechanisms might actually produce knowledge changes with effects that correspond to these formalisms; the formalisms are convenient and hence chosen for reasons other than micro-level verisimilitude. The major investment in building a truly knowledge-based production theory, well-suited to close analysis of the problems of change, was never made. Recently, however, some beginnings have at least been made." pp. 2

Professor Winter provides support for a theory of how the various inputs and outputs of a production process provide an essentially known set of production possibilities. That a production set of possibilities provides a means to provide for a multitude of options in a business. This accurately describes the oil and gas industry. There are many ways to proceed with the drilling and completion of wells, and how the variety of possibilities provides little in terms of a consistent standard manner of interpreting and optimizing production. The scientists and engineers' craft is augmented by the strategic opportunities and issues that the industry face as well. Winter provides this as somewhat of a direction towards a new or "evolutionary theory of the firm".

"It was in introducing this problem that he (Wicksteed 1894 An Essay on the Coordination of the Laws of Distribution) made the notion of the production function explicitly in economic analysis for the first time in the following terms: The Product being a function of the factors of production we have P = f(a, b, c, ...)2. Neither in this statement nor in Wicksteed's subsequent analysis is there any hint that there is anything conceptually problematic about the idea of such a function; it is merely a mathematically explicitly expression of the long familiar idea that if the input quantities vary, the output quantity will vary as well, and in certain characteristic ways." pp. 5

"It is the production set concept that stands, in contemporary formal theory, for the classical idea of a "state of the arts" or for an "existing state of technical knowledge." Arrow and Hahn concisely say"

"Thus the production possibility set is a description of the state of the firms knowledge about the possibilities of transforming commodities."

"To assume that the production set has certain properties - for example, those that correspond to the linear activity analysis model - is thus an indirect way of imputing analogous properties to the "state of knowledge" that the production set describes. I have proposed here that this indirect approach may be understood as a reflection of the historical development of the theory. In the modern synthesis of the subject, production sets are a fundamental concept, production functions are a derived construct, and marginal productivity schedules are an implied attribute of production functions." pp. 9

It is at this point that Professor Winter opens the doors wide on the possibilities of more. What would happen in oil and gas if all the known methods and procedures that were available and could be immediately quantified to determine the optimal route to pursue the optimal production. I am suggesting here that a large collaboration with in the oil and gas industry, through the joint account, in real time, where I have suggested that the industry capability be determined in terms of the whole industry as opposed to the knowledge and understanding that is currently constrained by the individual or silo-ed companies. That this resource is commanded and controlled within the industry to what I have suggested as the Military Styled Command and Control governance structure. But Winter doesn't stop there, he takes it further to suggest that the limits to production knowledge have been constrained over the years. Hence the potential of yielding greater returns is suggested by Winter in;

Thus it happened that it became much easier for the theorist to describe the logical connection between the production set and the production than to explain the substance of what the production set supposedly represents - a state of knowledge. This neglect of the independent conceptual anchoring of the production set idea has inhibited both the recognition of its limitations and the development of alternative and complementary theoretical treatments of productive knowledge. The following section initiates the discussion of such treatments by exploring the central concept itself. pp. 10

2. The Nature of Productive Knowledge

Dr. Winter begins to deal with the human element of organizations as he discusses what an organization knows. The "learning by doing" and "learning by using" covered in my May 2004 publication provides an understanding of how organizations and people obtain tacit knowledge. Learning is a key competitive tool of the oil and gas industry. Next to NASA, the oil and gas industry is the most scientific business there is. The knowledge contained within each company is massive. How this information is managed could have benefits for the industry, particularly at a time when the expected retirements of senior staff is expected in the 5 to 15 year time frame. The following is a series of quotes that offer some salient criticisms and issues for the oil and gas industry.

However, an important implication of the discussion to follow is that a narrow focus on what goes on in human minds can seriously impede understanding what goes on when organizations produce things. That sort of understanding is the true objective here, and the scope of the term "productive knowledge" is therefore deemed to be expandable as necessary to cover whatever needs to be understood. pp. 11

and

"For engineers, production managers and corporate strategists, the visible face of the validity problem is the question of transferability across time and space. The process worked well today, will it also work well tomorrow? If we build similar facility in a remote location, can we confidently expect that one to work as well? The salience of these questions depends critically on the degree to which the answers seem to be in doubt. When experience seems to confirm the temporal and spatial transferability of the knowledge in use, it quickly acquires a "taken for granted" character. When problems arise, attention is directed to them until they are solved 'for practical purposes." Under both conditions, the judgements made are not those of philosophers or scientists who care about the validity question for its own sake, but of practical people who need to get a job done and have other urgent demands on their attention." pp. 12

Hence the paradox that employees face each day. The motivational and cognitive paradox were discussed in my May 2004 paper. In it, it refers to Dr. Wanda Orlikowski's Model of Technology Structuration which incorporates the motivational and cognitive paradox. Her paper is available on DSpace. We are running the risk of hopping down a bunny trail if we are not careful, however these two paradox are important to refresh our memories.

"Based on extensive studies of user's experience with word processors, Carroll and Rosson (1988) identified two significant paradoxes; The motivational paradox arises from the production bias. That is, users lack the time to learn new applications due to the overwhelming concern for throughput. 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." (Cox, Delisle 2003)

Professor Winter shifts gears again and immediately begins to discuss the risks of too much change, too many changes without the full recognition of the processes in operation.

While modern thinking may dismiss some beliefs and related practices as plainly superstitious and others as ill-founded, the line between superstition and practical knowledge is oftentimes difficult to draw. pp. 13

and

A striking and well documented example of the issues concerns the role of the water temples in the irrigated rice agriculture of Bali. In the traditional system that had developed over a period of more that a thousand years, the allocation of water among hundreds of farming communities was governed by the priests of the water temples. The temple system was responsive to the variation of rainfall by elevation, seasonally, and from year to year. Implicitly, it dealt with an underlying trade off between the requirements of pest control, which is facilitated by synchronized planting and harvesting among the farms, and the problems of allocation, which is complicated by synchronized decisions. This traditional system was disrupted when the government promoted change in agricultural practices a the time of the "Green Revolution" in the early 70's. The result was a brief period of increased productive, followed by a collapse caused by increasing pest problems and water shortages. Fortunately, the traditional system had been under scholarly examination by anthropologist J. Stephen Lansing, who extended his investigation into a systematic comparison of the ecological consequences and economic effectiveness of the traditional and officially promoted systems. Ultimately - but only after many years - this research led to a reversal of policy and an ensuing recovery of productivity (Lansing 1991; Lansing, Kremer et al. 1998) Professor Lansing commented, "These ancient traditions have wisdom we can learn from."

and

The unifying generalization here is that agricultural production is highly exposed to contextual influences arising in imperfectly understood natural systems of great dynamic complexity. pp. 14

These components need to be dealt with during this software development. If the wrong processes are baked into the software, that would be a disaster. Hence the important role that a user provides in making these developments driven by their collective needs. Dr. Winter provides a real time example in a highly controlled, scientific business, that being of Intel and their change processes.

"A semiconductor factory (a "fab") and its operating procedures can be viewed as an enormous and costly effort to achieve strong "experimental control" on the production process for semiconductor devices, made in the interest of attaining consistently high yields." pp. 14

and

"Elements that might (superficially) appear to be superstitious even appear in codified organizational practice, as in Intel's "Copy EXACTLY" technology transfer policy:
Everything which might affect the process or how it is run is to be copied down to the finest detail, unless it is either physically impossible to do so, or there is an overwhelming competitive benefit to introducing a change. Of course its true basis is not superstition, but a very rational adaptation to the reality that understanding of what does matter is limited." pp. 15

and

"Finally, there is one major consideration limiting the validity of productive knowledge that the examples of agriculture and semiconductor production may not adequately suggest: people are involved. People are also involved as the customers, the consumers, the ultimate arbiters of productive achievement. When the product is corn or computer chips, it may be reasonable to consider that the "experiment" ends when the product appears, and set the customer response aside as a separate problem. But what if the product is education business consulting health care, elder care or day care, entertainment, or just "the dining experience"?" pp. 17

and

Quite rational satisficing principles dictate that investment in the quest for understanding be deferred until there is a symptom of trouble to deal with. When the pace is fast and the competitive pressure intense, such deferral may even involve suppression of ordinary skepticism about the rationale for prevailing ways of doing things. Paradoxically, "practical men" are constrained to be gullible, while high standards of proof are a luxury reserved to certain cliques among the inhabitants of the ivory tower. pp. 18

Distributed Character.

Professor Winter brings up the point that the individual knowledge is one issue, other issues such as work groups, teams, organizations and I am going to suggest clusters, such as Calgary, Houston and Aberdeen, each contain bodies of knowledge that may be both competitive and complementary.

A third distinctive attribute of productive knowledge is that it frequently resides in work groups or organizations rather than in individuals. This is not simply a matter of the same knowledge being held by several individuals, although such common knowledge may play an important role. Neither is it adequately captured by the image of complementary specialized skills being coordinated in the execution often exists only as it is evoked in the actual activity of the group. It is crucially a matter of distributed knowledge, i.e., of complementary parts of the same functional unit of knowledge being held by several individuals and applied in a coordinated way - the coordination itself being a crucial aspect of the knowledge. pp. 22

Accepting the view that knowledge can reside in a group is in this sense a "forced move". Just as practice allows an individual to improve in the performance of a complex skill through improved coordination, so the shared practice of a group permits patterns of multi-person coordinated action to arise, improve and stabilize. pp. 23

In recent years, the fact that productive knowledge often resides in groups rather than in individuals has received increasing attention both from business firms and from scholars outside of the economics discipline. There has been a striking degree of mutual reinforcement between the interest in these issues on the business side, driven by the practical concerns of an increasingly knowledge - based economy, and academic scholarship. pp. 25

To put it another way, it is hard to find a potential barrier to the movement of knowledge that does not function significantly as an actual barrier: national boundaries matter, firm boundaries matter, plant boundaries matter and even within - plant boundaries matter (Dyer 1998). To explicate the functioning of such a complex, multi-level system of distributed knowledge stands as a major challenge for theorists. pp. 28

These last few quotes reflecting the energy industry is not alone in approaching these issues. Clearly the majority of all businesses face similar knowledge and employee retention systems. It appears to me that the level and quality of the research in these specific areas is increasing. However, the difficulty ahead is accurately reflected by the two concepts that Winter has put forward in this paper. The interactions between these cause the complexity of the problem to accelerate in my opinion. The production set of possibilities that an individual, group, organization or cluster has at its disposal is one aspect of how the knowledge is deployed, the problem being where did it come from, how reliable and accurate is it. These issues can best be summed as the underlying issues around tacit knowledge. Its value, difficulty in obtaining and relying upon. The next issue that Winter brings is one of how the capture of tacit knowledge can be replicated throughout an organization or even an industry. That will be discussed in a Part B of this paper.

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