Professor Thomas Malone on Organization

Taking a quick break from our review of Professor Langlois' paper "Innovation Process and Industrial Districts" we have a quick article and video series from MIT Professor Thomas W. Malone. We covered another video of Professor Malone's back in February of 2006, in both instances he is promoting the ideas that are part of his book "The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life".

MIT Sloan Management Review are providing this article and video series entitled "A Billion Brains are Better Than One". One of the first points that is made is it's not about the technology.

Well, sure, executives and everybody else knows about the new kinds of technologies that keep popping up. But there’s a key perspective that a lot of people don’t really get yet, which is that these new technologies change the essence of organizations.

Moving to the Joint Operating Committee (JOC) is only possible through the use of the new Information Technologies. But the real value resides in the interactions that can occur between people and organizations. When we structure the Joint Operating Committee with the Draft Specification is when we begin to generate that value.

There is also the scope of these changes. Through our review of Professor Carlota Perez we have been able to map the impact that technologies have on the long term economy. Creative destruction is the term that best describes this process of renewal. The Information & Communication Technology Revolution (ICTR) provides the equivalent impact of the industrial revolution. And people within the oil and gas industry can fully participate in this by joining People, Ideas & Objects here.

To a greater degree than any technologies since those that enabled the Industrial Revolution, we’re now in the midst of a transformation in how businesses are organized. And the changes are not in production technology, but in coordination technology.

This is not a short term one off type of arrangement. This is a permanent change in the way that the oil and gas industry will operate and organize itself. I see a 40 year cycle of innovation and iterative development being generated by these communities. That is the scope of the possibilities. Malone notes;

You don’t think the corporate world understands the distinction you just made?

No, I don’t. Most people still think of technology as something that we use to do the same old things, not as something that changes the things we can do in the first place.

and

The change to more decentralized businesses is well underway. I think there’ll be ups and downs. Some companies will go up, down, backwards and sideways. It’ll be a complex process, something that will take place over decades. But it is one of the most profound changes that we’ll see in the first half of the 21st century.

Being part of that change is what gets me up in the morning. We stand at a point in time in which we can participate in positive change. Where the scope of what can be achieved in the next few decades is unimaginable. This can only happen as a result of the full deployment of Professor Carlota Perez "Small Knowledge Intensive Enterprises" (SKIE) or Professor Richard Langlois' "Industrial Districts" or People, Ideas & Objects Community of Independent Service Providers (CISP). Only then can we optimize what Professor Malone says are the benefits of this type of organization.

I go into a lot of the details about this in my book The Future of Work (Harvard Business School Press, 2004). But the short version is that I think we’re likely to see these changes first in the places where the benefits are most important. The benefits of having lots of people make decentralized decisions are that people are more highly motivated, they work harder, they’re often more creative. They’re willing to be more inventive, to try out more things. They’re able to be more flexible when they can adapt to the specific situation in which they find themselves rather than having to follow rigid rules sent down from on high that may or may not apply in this particular situation. And often, they just plain like it better.

and

But in a knowledge-based and innovation-driven economy, in high tech, R&D-oriented industries, the critical factors of business success are often precisely those benefits of decentralized decision making: freedom, flexibility, motivation, creativity.

The question is how do these changes come about. First by becoming a member of this community. Second we secure the necessary funding to support the communities in the long term. These are the themes of which we are writing about here. The current management of oil and gas will not participate in this revolution in which they are not a part of. They have chosen a form of organizational self-selection. These communities appeal to the investor / shareholder in oil and gas. And collectively the People, Ideas & Objects and associated communities provide these investors with the means in which to organize and manage their oil and gas assets.

I actually think the changes will happen more often from new companies, new organizations that are started on a different basis right from the beginning. They won’t always work. It’s not always a good idea. But in the cases where a decentralized way of working actually works better, those new companies will have an advantage. They’ll grow or be replicated by lots of other similar companies. And eventually, the old companies that haven’t figured out how to change themselves will either be acquired or go out of business or belatedly imitate the new ways of doing things.

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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Two points of interest.

I want to highlight two different issues or articles of interest today. The first is a video by Professor Simon Johnson of MIT making a presentation on his new book 13 Bankers. Although not directly on topic, the video provides a different perspective on the financial crisis, which has morphed itself into what is now called the debt crisis. A debt crisis that the oil and gas producers can ill afford. Professor Johnson's video makes the presentation of his issue, and it will be interesting to see how his ideas develop.



The second point of interest is a spectacular paper that I am reviewing. The paper is one of the many from the April issue of the Journal on Industrial and Corporate Change. The specific paper is written by Professor William Lazonick and is entitled "The Chandlerian corporation and the theory of innovative enterprise." The final paragraph of the document reads.

In the 2000s, it can fairly be said that the Chandlerian corporation has ceased to exist. In historical retrospect, Alfred Chandler uncovered the dynamics of a historically-specific business model that drove the development of the world’s richest economy. The essence of capitalism is, however, as Schumpeter recognized, change. The work of Chandler has provided us with a deep understanding of the foundations of US economic power in the middle decades of the last century. His work does not provide us with a roadmap for understanding the business models that have become dominant in the first decades of the 21st century. There is a need for us, who seek to build on the Chandlerian legacy, to remain committed to the integration of theory and history. My claim is that, with its focus on strategic control, organizational integration, and financial commitment, “the theory of innovative enterprise” is a potent framework for analyzing the process of change. It is a framework that, through the integration of theory and history, can enable us to “catch up with history” so that we can analyze the present as an evolving reality before the present as history passes us by.

I will be writing my review of this document in multiple parts. I am also extensively quoting the text and as such it is making for a long series of posts. In the back of my mind I think these posts would be substantially more valuable to the readers if they were to read the paper first and then review the application of Lazonick's paper to People, Ideas & Objects. So with that thought the paper can be downloaded from here.

The many points that Professor Lazonick is making are directly applicable to the oil and gas industry. Over a period of time, during the low energy prices era, the demands of the business  required optimization in order to survive. However, in the past 10 years the marketplace has changed to this new energy era we find ourselves in today. An era where demand is insatiable and supplies are constrained. Creating the higher commodity prices that re-allocate the financial resources towards the innovative oil and gas producer. The marketplace has shifted, however, the energy industry remains constrained in an optimizing mentality that is inconsistent with its needs.

The shift from optimization to an innovative footing is counter cultural. We can't get to the innovative footing the energy industry needs without Schumpeter's creative destruction being put into full force. What is also clear is that the move to an innovative footing is a substantial capital investment. Starting off with the development of People, Ideas & Objects and continuing on within each producer firm developing their own scientific capabilities. The current management are locked in the optimization mindset, and are conflicted by their reported earnings from higher commodity prices. They have poorly prepared us for the need to change, and have betrayed our interests in this constant pursuit of optimization. A constant pursuit of optimization that Lazonick shows leads to the destruction elements of Schumpeter's creative destruction.

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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Professor Baldwin and von Hipple VI

To finish off the review of Professor Carliss Baldwin and Professor Eric von Hipple's paper "Modelling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation". I feel it is appropriate to highlight just the final paragraph of the document. It speaks to all that we are working to do for the oil and gas industry.

We conclude by observing again that we believe we are in the midst of a major paradigm shift: technological trends are causing a change in the way innovation gets done in advanced market economies. As design and communication costs exogenously decline, single user and open collaborative innovation models will be viable for a steadily wider range of design. They will present an increasing challenge to the traditional paradigm of producer-based design – but, when open, they are good for social welfare and should be encouraged.

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Professor George Schultz on MIT Video

In a video entitled "Energy: The Past Must Not Be Prologue". Professor George Schultz reflects on the stop / go mentality regarding energy. During his tenure of the Eisenhower, Nixon and Reagan administrations he saw first hand the effects of disjointed and canceled initiatives. Now that we are in a similar situation, and as he notes more dire as a result of the U.S. importing over 60% of their oil needs. He hopes that the situation regarding the long term vision of energy security is fulfilled through a long term commitment.

Secretary Schultz starts his presentation by stating his thesis.

Over the past four decades we have experienced a roller coaster ride on an energy express that has landed us unnecessarily in a place that is dangerous to our economy, our national security and our environment. Now in 2008 we have the chance to realize what we know. We can do something that we should of done long ago, and didn't.

His policies recommendations remind me of how sound the Reagan administration was. One of the stalwarts of the Reagan years was George Schultz in a variety of positions. It is clear in hindsight that he served his country well. His policy recommendations are exactly what needs to be enacted. This is a frustrating topic for him. His attempts to resolve some of these problems in the Nixon administration were obviously frustrated by the politics of the day. Nonetheless he suggests he is optimistic this time, and that this time may be different but we have to get it right and stick to it.

His recommendations are:

Give wind and solar a consistent tax environment. Agreed these will not provide the type of scale of even hydro electricity but everything helps.

Conservation. Disagree, not to suggest we should be wasteful, but energy is the means in which economies operate. Attempts to conserve may be counter to the benefits of the economy. If each barrel of oil offsets 18,000 man hours of physical labor, deferring the use of that energy is counter productive. The costs of one barrel of oil will show the world that at future prices it will remain the best of bargains.

Carbon capture and sequestration. Agreed, CO2 is a miscible agent and therefore has the dual role of pressuring formations and enabling more oil to be separated from the rocks that hold it. The more CO2, the less the cost, the greater the benefit to future production.

Nuclear power, Schultz suggests a careful opening of this means of energy production. Not that nuclear energy production is bad, its the waste and nuclear proliferation that create more problems.

Stop doing some of the dumb things that we are doing. "The encouragement of producing corn based ethanol" is a dumb policy. Agreed more energy is consumed in the entire process then what is produced.

Develop our own oil and gas resources. Or as Sarah Palin says, drill baby drill.

A floor price for oil and gas prices in the U.S. Having a defined value for the resources you find and produce will go a long way to stabilizing the stop / start manner of the energy industry. The costs to the consumers may actually be less in the future.

Heavy spending on basic research. Cites an example in the health debate of how more is being spent on insurance, whereas the reason the quality of health care is so high is the basic research that has been undertaken. Schultz also notes the role of innovation in the development of science.

At around 30:00 minutes Professor Schultz quotes MIT President Susan Hockfield in an impassioned call for sustained energy research.

Lastly at 54:00 minutes he notes the effect of the academic life, or the living in the world of ideas. When he was called upon by government he was always able to leverage the ideas that he knew were around. I think this is something that the users, and most specifically the Community of Independent Service Providers, can do with their career. The Draft Specification is the beginning of the ideas in People, Ideas & Objects. They will be able to be taken and built upon in ways that we can't even imagine today.

As always, if you are a producer and would like to support these communities financially, please follow our Funding Policies & Procedures, and if you are potential user, please join us here.

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Professor's Baldwin and von Hipple V

Part V of our review of Professor Baldwin's and von Hipple's working paper "Modelling a Paradigm Shift: From Producer Innovation to User and Open Collaboration Innovation." Lets assume for a moment the knowledge of how the oil and gas industry could be codified by 1,000 people. Much as the people are being organized and their contributions codified in the People, Ideas & Objects Preliminary Specification. Speaking prospectively, irrespective of the fact that these people are members of the Community of Independent Service Providers (CISP) and they earn their living through the contributions they make to the software, and their oil and gas producer clients. What's in it for them. Baldwin and von Hipple make the following point clear.

User innovators will choose to participate in an open collaborative innovation project if the increased communication cost each incurs by joining the project is more than offset by the value of designs obtained from others. To formalize this idea, assume that a large-scale innovation opportunity is perceived by a group of N communicating designers. As rational actors, each member of the group (indexed by i) will estimate the value of the large design and parse it into two subsets: (1) that part, valued at vsi, which the focal individual can complete himself at a reasonable cost (by definition, vsi > dsi); and (2) that part, valued at voi, which would be “nice to have”, but which he cannot complete at a reasonable cost given his skills and other sticky information on hand (by definition voi ≤ doi ).

Turning to the oil and gas producer, what's in it for them to support the People, Ideas & Objects developers and the associated CISP? Clearly the User innovations as Baldwin and von Hipple call them applies to the producer as well. They have access to a system that replicates any and all processes within the oil and gas industry. It's not that they need to have all those processes managed, but it is possible for them to run their firm in the most profitable manner by using People, Ideas & Objects and the CISP. The costs of the software are as little as a $1.00 per year per barrel of oil equivalent daily production. Yet they too are benefiting from these open collaborative innovations in the same manner the CISP is.

Consider finally the model of open collaborative innovation. Recall that open collaborative innovation projects involve users and others who share the work of generating a design and also reveal the outputs from their individual and collective design efforts openly for anyone to use. In such projects, some participants benefit from the design itself – directly in the case of users, indirectly in the case of suppliers or users of complements that are increased in value by that design. Each of these incurs the cost of doing some fraction of the work but obtains the value of the entire design, including additions and improvements generated by others. Other participants obtain private benefits such as learning, reputation, fun, etc that are not related to the project’s innovation outputs. For ease of exposition, we will derive the bounds of the model for user innovators first, and then consider the impact of other participants on those bounds.

Simple, but why has this not been done to date? Clearly the costs of collaboration on a large scale have dropped to minuscule levels. The Internet not only reduced the costs but also enabled these formerly disparate groups to associate with little to no costs. The only requirements to finding other groups of interested people is to Google the topics of your interest.

This is the first bound on the open collaborative innovation model. It establishes the importance of communication cost and technology for the viability of the open collaborative model of innovation. The lower the cost of communicating with the group, the lower the threshold other members’ contributions must meet to justify an attempt to collaborate. Higher communication costs affect inequality (5) in two ways: they increase the direct cost of contributing and they reduce the probability that others will reciprocate. It follows that if communication costs are high, an open collaborative project cannot get off the ground. But if communication costs are low for everyone, it is rational for each member of the group to contribute designs to the general pool and expect that others will contribute complementary designs or improve on his own design. This is in fact the pattern observed in successful open source projects and other forums of open collaborative innovation (Raymond, 1999; Franke and Shah, 2003; Baldwin et. al. 2006; Lakhani and von Hippel, 2009).

It would have been prohibitive, boring and frustrating to attempt the collaboration design of the Preliminary Specification without the Internet. Communication and design costs would have escalated to exorbitant amounts and the quality of the end product would be far less then the "open" collaboration design that Baldwin and von Hipple write about and is being employed by People, Ideas & Objects for this software development. There's more. As in this next quotation, the scope and scale of these designs can now be undertaken. The 2010 budget for the preliminary specification has been set at $10 million, yet the scope of the application is far greater then any other application designed in the oil and gas marketplace.

Note that this bound is N times greater than the bound on the design cost of the average single user innovator. Thus given low-enough costs of communication, open collaborative user innovators operating within a task-divisible and modular architecture can pursue much larger innovation opportunities than single user innovators acting alone.

The importance of this fact is how individuals should reconcile the ambition of this project to the reality of life. Building an application that uses the "industry" perspective through the JOC brings the scope to a frighteningly large level. The JOC is a generic organizational structure that is and can be populated by any number of changing numbers of producers and the people that work within the oil and gas industry. The use of the JOC in the Draft Specification is what demands open collaborative innovation design. Critical to making this an operational possibility is the ability of the Preliminary Specification to implement the Draft Specifications Military Command & Control Metaphor as a key cornerstone of the Compliance & Governance module.

But if communication costs are low enough to clear these hurdles, then the second bound [(6) and (6’)] shows that, using a modular design architecture as a means of coordinating their work, a collaborative group can develop an innovative design that is many times larger in scale than any single member of the group could manage alone.

Figure 3 in the paper shows that the Open Collaboration Innovation is able to approach a far higher level of design sophistication then the Producer Innovators. At no time before has this level of design sophistication been possible nor has the scope and scale been so (relatively) easy to approach. Producers and Users, and particularly members of the Community of Independent Service Providers stand to gain substantially from their contributions to this project. The overall design is comprehensive and ambitious. Today's technologies, and particularly the Internet, enable the type of systems design that the Draft and Preliminary Specifications involve. And although I don't think I mentioned the last two phases of the design publicly before. Now would be a good time to note that the Preliminary Specification will be used in a similar manner to the Detailed and Final Specifications. (Please note with a lag of six months the Detailed Specification can be completed concurrently to the Preliminary Specification.) The costs, which are budgeted at $10 million for the Preliminary Specification are negligible. To participate in these development as a supporting producer please follow our Funding Policies and Procedures here. And if you want to participate as a User or a member of the Community of Independent Service Providers please join us here.

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Professor's Baldwin and von Hipple IV B

In this entry I will highlight many pertinent points of Baldwin and von Hipple's research. Much of the context and content of their work is new, and as they state, not necessarily covered before.

However, to our knowledge, there has been no systematic thinking about the conditions under which each model is likely to appear, and whether each is expanding or contracting relative to the other two. To make progress on these question, it is necessaryto develop a theoretical framework that locates all three models in a more general space of attributes. That is our aim in this section.

People, Ideas & Objects is based on open collaborative innovation. Based on the modular Draft Specification as its starting point, the contributions of users is necessary to cover the scope of work undertaken in the oil and gas industry. This scope of work has never previously been undertaken due to the communication and design costs prior to the Internet were prohibitive. Only today with the Internet and the tools that are available can we seek to codify the understanding of "what" and "how" the oil and gas industry operates as. This codification is being captured here in the Preliminary Specification that will form the basis of the People, Ideas & Objects application modules. It is the technology that is enabling this to be undertaken. Use of the Joint Operating Committee was the hypothesis of this projects in the May 2004 Preliminary Research Report, and is therefore, the underlying reason that this project holds the promise of "resolving every administrative problem in oil and gas in the last fifty years." (Not my words.) It is the "aha" moment that people have when they realize the Joint Operating Committee is the key to enabling these performance and innovation based opportunities.

In the particular branch we are most concerned with, organizational forms and industry structures are taken to be endogenous and historically contingent (Chandler, 1962, 1977; Wlliamson, 1985, 1991; Nelson and Winter, 1982; Aoki, 1984, 2001; Langlois, 1986a, 2002; Baldwin and Clark 2000; Jacobies, 2005). Different forms may be selected to suit different environments and then adaptively modified. Thus organizational forms emerge in history and recede as technologies and preferences change.

I highlight the last sentence of that quotation as we are now at the point where changes can be implemented. Our economic challenges today require us to undertake these types of organizational changes. What has brought us to this point is no longer capable of carrying us further. And indeed we will fall further behind if these organizational changes are not implemented in a timely manner. For the Community of Independent Service Providers (CISP) it is important to become involved in this project as its sustainability is represented in the fact that organizational forms do not change that frequently.

We have seen the 20th Century benefit from the work done by the hierarchy. Clearly society is better off today then if we had not had the model of organization we use so systemically in business today. We have also benefited from the use of computer technologies that have enabled the reach of the hierarchy to span far greater then previously possible. This is where the oil and gas industry became too focused on the hierarchy as opposed to the Joint Operating Committee. As companies employed greater levels of Information Technology, they began to focus on internal needs of the bureaucracy and avoided the business of the business as represented in the many Joint Operating Committee's of the firm. To address those JOC's it would have required to undertake the design that is being done in its first iteration in the Preliminary Specification. Baldwin and von Hipple note that the design costs and communication costs would be too great to overcome in any time prior to the Internet. Now these costs are substantially below 1/3 of 1% of the industry. Viable by any measure.

Finally in contrast to virtually all prior work except for Chandler (1962, 1977), we take an explicitly technological approach to the question of viability. Fundamentally we assume that in a free economy, the organizational forms that survive are ones with benefits exceeding their costs (Fama and Jensen, 1983a, b). Costs in turn are determined by technology and change over time.

Costs as represented by this projects Business Model are minuscule when compared to the revenue streams of the oil and gas industry.

Adopting Chandler's logic, we should expect a particular organizational form to be prevalent when its technologically determined costs are low, and to be ascendant - i.e., growing relative to other forms - when its costs are declining relative to the costs of other forms.

Today, design costs and communication costs are declining rapidly, and modular design architectures are becoming common for many products. In the rest of this section, we argue that these largely exogenous technological trends make single user innovation and especially open collaborative innovation viable across a wider range of innovation activities than was the case before the arrival of technologies such as personal computers and the Internet. We have seen and expect to continue to see, single user innovation and open collaborative innovation growing in importance relative to producer innovation in most sectors of the economy. We do not believe that producer innovation will disappear, but we do expect it to become less pervasive and ubiquitous than was the case during most of the 20th century.

To participate in this community, please join me here. And if you are part of our targeted market, please contact me here to financially support this community.

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Professor's Baldwin and von Hipple IV A

Before the Christmas break we were reviewing a paper from Professor's Carliss Baldwin and Eric von Hipple. Our review was comprehensive as the majority of the material is pertinent to both the development of People, Ideas & Objects software and associated Community of Independent Service Providers, (CISP) and the innovative oil and gas producer. The title of the paper "Modelling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation". To date there are three blog posts reviewing this paper here, here and here. Reintroducing this work by reviewing the three posts, re-highlighting the papers abstract, and finally adding some of the papers definitions will help refresh our memory of this very pertinent work.

In this paper we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single user individuals or firms, and open collaborative innovation projects. We analyze the design costs and architectures and communication costs associated with each model. We conclude that innovation by individual users and also open collaborative innovation increasingly compete with - and may displace – producer innovation in many parts of the economy. We argue that a transition from producer innovation to open single user and open collaborative innovation is desirable in terms of social welfare, and so worthy of support by policymakers.

We see the value that this paper has to this community, not only in defining how this community operates, but also the validity for the CISP participants investing their careers, and how the innovative oil and gas producer can approach the scope of their organizational constraints. I expect to have the next installment of this paper completed within the next week. This involves the review of their analysis of the three different models of innovation, or section 3 "Where is each model viable."

It may also be of value to review our 2010 budget to see how the user within the CISP generates their own economic value. They are compensated for their work in designing and contributing to the development of the software. And secondly, their use of the finished software application is available to them as members of the CISP, free of charge. Their use of the software is part of the value adding services they provide to their innovative oil and gas clients. People, Ideas & Objects generates our Fees and Penalties from the producers that benefit from this software. These charges are assessed based on our business model.

Baldwin & von Hipple's Definitions

A single use innovator is a single firm or individual that creates an innovation in order to use it.

A producer innovator is a single, non-collaborating firm.

An open collaborative innovation project involves contributors who share the work of generating a design and also reveal the outputs from their individuals and collective design efforts openly for anyone to use. The defining properties of this model are twofold: (1) the participants are not rivals with respect to the innovative design (otherwise they would not collaborate) and (2) they do not individually or collectively plan to sell products or services incorporating the innovation or intellectual property rights related to it. An example of such a project is an open source software project.

A design is a set of instructions that specify how to produce a novel product or service.

A given mode of innovation is viable with respect to a particular innovation opportunity if the innovator or each participant in a group of innovators finds it worthwhile to incur the requisite costs to gain the anticipated value of the innovation. By focusing on anticipated benefits and costs we assume that potential innovators are rational actors who can forecast the likely effects of their design effort and choose whether or not to expend the effort (Simon, 1981; Langlois, 1986b; Jensen and Meckling, 1994; Scott, 2001).

Our definitions of viability is related to: the contracting view of economic organizations; to the concept of solvency in finance; and to the concept of equilibrium in institutional game theory.

In contracting literature, firms and other organizations are viewed as a "nexus of contracts,", that is, a set of voluntary agreements (Alchian and Demsetz, 1972; Jensen and Meckling, 1976; Fama and Jensen, 1983a, b; Demsetz, 1988; Hart, 1995). For the firm or organization to continue in existence, each party must perceive himself or herself to be better off with the contracting relationship than outside of it.

We define an innovation opportunity as the opportunity to create a new design. With respect to a particular innovation opportunity, each of the three models of innovation may be viable or not, depending on the benefits and costs flowing to the actors.

In terms of benefits, we define the value of an innovation, V, as the benefit that a party expects to gain from converting an innovation opportunity into a new design - the recipe - and then turning the design into a useful product, process or service.

Each innovation opportunity has four generic costs: design cost, communication cost, production cost and transaction cost.

Design cost, d, is the cost of creating the design for an innovation.

1. The cost of identifying the functional requirements (that is, what the design is supposed to do); 
2. The cost of dividing the overall problem into sub-problems, which can be solved separately;
3. The cost of solving the sub-problems;
4. the cost of recombining the sub-problems' solutions into a functioning whole.
   

Communication cost, c, is the cost of transferring design related information among participants in different organizations during the design process.

Production cost, u, is the cost of carrying out the design instructions to produce the specified good or service.

Transaction cost, t, is the cost of establishing property rights and engaging in compensated exchanges of property.

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Professor's Baldwin and von Hipple III

The third part of our review of the Baldwin and von Hipple paper focuses on the literature review. It is in this section of the paper that the issue of Intellectual Property is raised. Baldwin and von Hipple write what most people would consider to be factual in understanding how innovations are developed.

When taken together, the findings of all these empirical studies make it very clear that users have long been and are doing a lot of commercially-significant process development and product modification in many fields.

Let us first gain an understanding of what the authors define as Users. This user description is not different from what we are employing here at People, Ideas & Objects.

Users, as we define the term, are firms or individual consumers that expect to benefit from using a design, a product or a service. In contrast, producers expect to benefit from selling a design, a product, or a service. Innovation user and innovation producer are thus two general "functional" relationships between innovator and innovation. Users are unique in that they alone benefit directly from innovation. Producers must sell innovation-related products or services to users, hence the value of innovation to producers is derived from users willingness to pay. Thus, in order to profit, inventors must sell or license knowledge related to their new design, manufacture and sell goods embodying the innovations; or deliver and sell services incorporating complementing the innovations.

Users have unlimited access to the Intellectual Property that is developed by People, Ideas & Objects and the community. This IP, and all associated ideas, are a product of the User community and freely available for the user community to employ in their own service offering to their oil and gas clients. The only limitation for users is the ability to run the binary of the software is limited to People, Ideas & Objects exclusively. Also only licensed users who are active in the community will have access to the software, ideas and knowledge held within the community. Creating an exclusive service offering who's focus is to provide the oil and gas producer with the most profitable means of oil and gas operations.

The users then earn their fees in providing the services and software to oil and gas producers. Users are licensed to access this information based on their own skills and provide those services to their oil and gas producer clients at no charge for the software or the access to the underlying IP. (Users bill their clients for their services.) Clearly the involvement of a user within this community is critical to the success of the project, as we discussed yesterday. And this success provides the users with a means to pursue their career in the most effective manner that they see fit. Why do we do this.

Reexaminations of traditional economic arguments triggered by evidence of free revealing show that innovators generally freely reveal for two economically rational reasons. First, it is in practice difficult to effectively protect most innovations via secrecy or intellectual property rights. Second, significant private benefits often accrue to innovators that do freely reveal their innovations.

The Draft Specification is designed around eleven modules. Professor's Baldwin, Langlois and Williamson have defined the benefits of modularity and the importance of modular designs. Here the authors provide a good summary of how modularity fits within this project.

Modularity is important for collaboration in design because separate modules can be worked on independently and in parallel, without intense ongoing communication across modules. Designers working on different modules in a large system do not have to be colocated, but can still create a system in which the parts can be integrated and will function together as a whole. In small projects or within modules, designers can utilize “actionable transparency” rather than modularity to achieve coordination. When projects are small, each designer’s activities are “transparent” to his or her collaborators. In open collaborative projects, modularity and actionable transparency generally go hand in hand, with both factors contributing to the divisibility of tasks (Colfer, 2009).

Here in this last quotation is the real value of the CISP. The value of participating in this community is reflected in the name People, Ideas & Objects. Ideas are non-rival and therefore participation brings about the greatest attributes of ideas for all involved. Ideas are able to build on the prior knowledge and the many innovations and ideas that came before it. Having the communities ideas and innovation backed up by a user driven software development capability, only makes this more worthwhile for the members of the community and their oil and gas producer clients.

Building on arguments of Ghosh (1998), Raymond (1999), and von Hippel and von Krogh (2003), Baldwin and Clark (2006 b) showed formally that, if communication costs are low relative to design costs, then any degree of modularity suffices to cause rational innovators that do not compete with respect to the design being developed to prefer collaborative innovation over independent innovation. This result hinges on the fact that the innovative design itself is a non-rival good: each participant in a collaborative effort gets the value of the whole design, but incurs only a fraction of the design cost.

Please join me here.

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Professor's Baldwin and von Hipple II

I want to expand on Professor's Carliss Baldwin and Eric von Hippel's paper that we recently started reviewing. I think this paper is critical in defining many of the attributes of this software development project, and will add value with new insight and information. Specifically, in applying the findings in this paper I hope to prove to the User community that this type of project is less risky from the point of view of them investing their time and efforts in participating. The pace of this paper's review will be thorough and complete. Limiting our review in this second installment to just the Introduction and Overview.

As background information, People, Ideas & Objects software applications are marrying the User groups that define their needs in the software, with the software developers. This relationship is permanent and maintains the project in a constant state of change based on the users innovations. Software is not a destination but is best considered a journey. Users of People, Ideas & Objects applications are those that use this software in combination with their own service operations. The Community of Independent Service Providers derive their revenue from both the producers that employ them for their services and from People, Ideas & Objects for the work the users do in designing, implementing and working on development of the software. Creating an environment where the users are key in every aspect and element of this community.

This change oriented and innovation based community will generate their own innovations. In addition the People, Ideas & Objects software needs to mirror the needs of the producers who are iterating on the earth science and engineering innovations involved in oil and gas. The point I want to make is the users commitment to this community involves substantial risk and a comprehensive career commitment. Of the three models of innovation People, Ideas & Objects and the Community of Independent Service Providers fall into the authors "open collaborative model".

Our analysis will lead us to conclude that innovation by individual users and also open collaborative innovation are modes of innovating that increasingly compete with and may displace producer innovation in may parts of the economy.

We will argue that when it is technologically feasible, the transition from closed producer or single user innovation to open single user or collaborative innovation is also desirable in terms of social welfare, hence worthy of support by policy-makers. This is due to the free dissemination of innovation designs associated with the open model. Open innovation generates innovation without exclusivity or monopoly, and so should improve social welfare other things equal.

This last quote is in line with why this project is called People, Ideas & Objects. It is derivative of Professor Paul Romer's new growth theory of People, Ideas & Things. Which states in the virtual world ideas can be used by many people without diminishing the value to anyone else. The important take away for me was that we are needing exponential volumes of ideas to expand our economy. How these ideas are vetted, developed and implemented is the topic of Professor Baldwin and von Hipple's paper and this software development.

Users need to understand that the success of this project is wholly dependent on their involvement. This paper provides evidence that this mode of open collaborative innovation is preferable, "should improve social welfare" and will be successful. Therefore mitigating their risks in investing their time and efforts in this community. I think this provides the user with the most sound and economic basis for their review of this project from the point of view evaluating their investment in this model. Please join me here.

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Professor's Baldwin and von Hipple I

Professor's Carliss Baldwin of Harvard, and Eric von Hipple of MIT have jointly published a paper that is of the highest quality and topical focus. Entitled "Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation." Carliss Baldwin is someone we have followed closely on this blog. Her work has been in the area of Modularity, Transaction Costs and Thin Crossing Points and is incorporated in the Draft Specification, mostly in the Accounting Voucher module. You can find our review of her work by selecting the Baldwin Label on this blog. We have also reviewed Eric von Hipple's work here as well. A review of his book "Democratizing Innovation", (Free eBook here.) and an MIT video of his presentation. His work is mostly on innovation and we have incorporated some of his ideas in the Draft Specification. Specifically, use of his understanding of Intellectual Property (IP) and how it can be applied in communities such as People, Ideas & Objects. I will briefly discuss IP in this post and hopefully be able to write about it in greater detail in the near future. Nonetheless, these IP related thoughts are incorporated here in the way that People can join this project. Coverage of Professor von Hipple's work does not have a label to aggregate all the posts in this blog, however you can search this blog for his content.

I want to put all this material out in this post, and address more of the substance in subsequent posts. I think this paper is of the highest quality and very pertinent to the work that is being done at People, Ideas & Objects. The abstract of this paper says it all.

In this paper we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single user individuals or firms, and open collaborative innovation projects. We analyze the design costs and architectures and communication costs associated with each model. We conclude that innovation by individual users and also open collaborative innovation increasingly compete with - and may displace – producer innovation in many parts of the economy. We argue that a transition from producer innovation to open single user and open collaborative innovation is desirable in terms of social welfare, and so worthy of support by policymakers.

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Innovation of innovation.

An interesting paper has been jointly published by MIT and The Wall Street Journal. Entitled "The New, Faster Face of Innovation." Written by MIT Professor's Erik Brynjolfsson and Micheal Schrage.

What we have learned is innovation and science are iteratively advanced. As innovations are developed, they have an impact on the underlying sciences, which enable further innovations. It is difficult if not impossible to make any reasonable comparisons between "most industries" and the oil and gas industry. Few share the high levels of pure science and almost pure capital orientation. The prospective prototypical producer needs to be built specifically to enable innovation, and the Joint Operating Committee is the ideal organizational structure to enable the innovative producer.

There exists bureaucracies that are the legacy of the 20th century. These bureaucracies are ill suited to meet the needs of the changing environment brought about by innovation. In addition to these organizations are the systems that support and identify that bureaucracy. And as I stated in the Preliminary Research Report, "SAP is the bureaucracy". We have also learned that if we want to change any organization, we need to address the software that the organization uses. To achieve the innovation we need in oil and gas requires the People, Ideas & Objects application modules to be built.

Much, if not all of the Draft Specification is based on the research that was conducted from 2003 to 2008. It's about innovation and how that can be enabled in the oil and gas industry.  Development of the ideas from this point forward has to involve the users. As the producers iterate on the innovations and science. The need for the organization and systems will have to change with them. Users are the front lines of these changes and will implement them through the purpose built systems and software development capability of People, Ideas & Objects.

But the essential point remains: Technology is transforming innovation at its core, allowing companies to test new ideas at speeds—and prices—that were unimaginable even a decade ago.

Setting the tone of this document as a technological focused article, this first quotation also reflects the generic nature of "most" businesses. Oil and gas is unique due to the orientation towards science and capital. These two attributes conspire to make the business a long term strategy fight as opposed to one that can benefit from such tactical iterations. Irrespective of the tone of this article, the next quotation is valid and should be considered as a necessity of the innovative oil and gas producer.

Companies will also be willing to try new things, because the price of failure is so much lower. That will bring big changes for corporate culture—making it easier to challenge accepted wisdom, for instance, and forcing managers to give more employees a say in the innovation process.

It may seem to many that the Draft Specification introduces to much change into the oil and gas producer. However, I would suggest that in the very near future many of the changes in the People, Ideas & Objects application modules will seem tame in comparison. What users should take from this is that the changes are not being made for the purpose of change itself or for technological reasons. Research in to the cognitive and motivational paradoxes as identified by Professor Wanda Orlikowski reflects the need for the scope of these changes in the organizations.

Already, this powerful new capability is changing the way some of the biggest companies in the world do business, inspiring new strategies and revolutionizing the research-and-development process.

and

Increasingly, the more innovative companies—the Googles and Harrah’s of tomorrow—will shift away from traditional research-and-development methods. Five years ago, for instance, a leadership team might have reviewed two or three “big” innovation proposals from consulting gurus; executive teams today might compare the outcomes of 50 or 60 real-world experiments to decide which ones to act upon.

Are we right? Basing the research done in the past six years in academic thinking is necessary to ensure we remain on track. One of the most valuable resources has been McKinsey Consulting. The number one consulting firm in the world have published volumes of pertinent research in these areas, and I have reviewed their material in 60 different posts on this blog. This is the process that I will continue to work on, and as the following quotation reflects, will become the means in which the total industry develops.

Even if a test doesn’t produce a workable idea, there’s usually something important to be gleaned from it. “Genius is born from a thousand failures,” says Greg Linden, an entrepreneur who has been an innovator at both Amazon.com Inc. and Microsoft Corp. “In each failed test, you learn something that helps you find something that will work. Constant, continuous, ubiquitous experimentation is the most important thing.”

Learning from failures is a difficult lesson for those concerned. But the risks and rewards are higher, particularly with today's oil and gas prices. Please join me here.

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Critical Issues and Grand Challenges,...

Addressing the critical issue of the oil and gas producers performance is one of today's grand challenges. Prices of the commodities is a guessing game from one quarter to the next, however we know two things. The global demand is clearly accelerating through the Brazil, Russia, India and China (BRIC) countries. And the global supply has remained constant at around 86 million barrels per day since 2005. We also know the amount of earth science and engineering effort per barrel of oil is climbing and will continue to do so throughout the rest of time we use the commodities as energy. The retirement of the industry brain trust and other issues seem to conspire to make it even more difficult.

Hydraulically fracturing shale shows much promise for highly prolific wells with aerial extents as broad as the Appalachians. Crushing that much rock will take some effort. The remaining political, financial and technical risks are growing larger each day. How will the industry find the volumes of more people and ideas necessary to profitably serve the future demand.

This MIT video entitled Critical Issues and Grand Challenges shows the path we are on here at People, Ideas & Objects is the right one. The first two presenters on this video provide information and insight that only seasoned CEO's can provide. The first is John Reed, the former CEO of Citibank to discuss the September 2008 banking crisis. There is no doubt in his mind that the "banking industry needs to be completely rebuilt and reconfigured." Suggesting that "without the government interventions, the banking industry was bankrupt." Here he talks about the scope of the challenge as being global and one that needs new and effective regulations that do not stifle innovation and progress.

Reed talks about the "Too Big to Fail" issue that is pre-eminent in regulators minds. That systemic risks have to be identified and removed before they cause the system to break down as it did in 2008. He feels that in the 1980's there was a change towards satisfying shareholders almost exclusively. And at the same time the compensation of management was permitted to expand as long as the shareholders were being satisfied.

The securitization of assets became the key marketing tool of the major banks. Here Banks were able to, as Reed points out, interactively determine what was necessary to have a rating agency provide the AAA rating for the securitized assets. Which over time made the ratings process less and less objective.

Reed's conclusion is as follows:

The industry must be rethought and rebuilt. A systems view which includes behavioral considerations is essential.

In viewing this presentation it becomes clear that the ways and means of international banking systems had become skewed towards those on the inside. This caused the damage to the economy and is unacceptable that it continue in the manner that it had.

I believe the oil and gas industry has changed materially in the last decade. Moving from the easy energy era to today's technically difficult market. I also believe this is a transition that has been ignored by management. Most of the companies that were present in the easy era have been able to realize substantial market value gains. By trading on the higher prices for the commodities, the management are well taken care of with the higher cash flows from these price fluctuations, not the value the managements have provided.

Second to discuss their industry is Denise Cortese, the CEO of the Mayo Clinic. In the U.S. he notes, people believe the health care system is broken. And he argues the vision for Health care is missing. Asking the audience to develop the vision Cortese asks "who would want to spend tomorrow at the worlds best hospital". Of course no one wants to be in a hospital. Cortese then asks why is the solution to health care, a Hospital? And commenting that nothing can be done on a large scale, like reforming health care, without a vision.

Particularly pertinent is he states "you don't self organize without a vision". Citing the example of WWII Cortese suggests that without General Eisenhower's vision, the troops sent in on D-Day would have been unable to self organize. When the 101st Airborne division was dropped nowhere close to their drop zone, they were still able to self organize and move, although chaotically, toward fulfilling that vision.

Its at this point of the video's remaining hour and five minutes that provides no new value and I recommend skipping the rest. To me the important aspect of this video is the need for these industries to be remade. Just as Professor Carlota Perez suggested as early as 2005, industries will need to make necessary changes to the organization to accommodate the impact of Information and Communications Technologies. Both Reed and Cortese suggested how the motivation in these industries is distorted, leading to their difficulties.

The vision that the Draft Specification provides is the road map for people to follow. Chaos is mentioned many times in the video, and I think it reflects clearly that these changes are not as smooth as one would assume could be. Thankfully we are not in the health care business where people could get hurt, or the financial business with the collateral damage we've experienced in the last year. We are talking about oil and gas ERP systems and I am not aware of anyone being hurt by that. Please join me here.

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MIT Video - Energy Secretary Steven Chu

I have expressed my disappointment about MIT's focus on energy in this blog before. Accusing MIT of having the right goals and objectives, but taking too many wild bunny trails down the path of alternative energy. When MIT suggests our energy issues requires an equivalent effort as to what was required to win WWII. That objective resonates with me, we have much work to do. Alternatives have proven more costly, more destructive of the landscape and of limited scale to replace the heavy lifting of the oil and gas industry.  

This MIT video of the U.S. Energy Secretary Steven Chu shows the destructive ways of the U.S. towards the oil and gas industry. A Nobel Prize winner, Chu is an academic. He has the budget and power to have a dramatic effect on the energy landscape and has indeed drank the alternatives kool-aid. Thankfully Chu is having difficulty getting many of his initiatives funded. 

This video is disconcerting as the "leadership" of Secretary Chu is heralded by MIT president Susan Hockfield. What appears to me as a rambling and incoherent discussion of his life and work, which was rewarded with the Nobel Prize. I don't see anything of value to be gained by reviewing this video. But there is much to learn of how off-base the current U.S. administration has become on the energy topic. As I have said before it is not a coincidence that the U.S. is the largest consumer of oil & gas and the largest economy. If we take an excursion down the alternative energy bunny trails I hope MIT and Secretary Chu understand that the great power the U.S. is, and will be, put in serious jeopardy. 

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Martin Feldstein and Simon Johnson on MIT Video

MIT has released a video of Professor Martin Feldstein and Simon Johnson from February 11, 2009.  (Click on the title of this entry.) Feldstein is the former and long time president of the National Bureau of Economic Research where he was responsible for defining the time frame of when a recession occurred. He is also a Professor at Harvard and a frequent speaker in many of the conferences and forums where ideas, problems and solutions are discussed. Simon Johnson is an MIT Professor and former Chief Economist at the International Monetary Fund. He is also an author of an excellent blog that can be sourced here.

They are of course discussing the current global economy and what can be done. Both are quite pessimistic, and rightly so. The solutions that are discussed are very complex and of questionable value. We are well within the point that the cumulative of the stimulus should have worked, yet are constantly bombarded by an additional trillion here or there. We therefore are very close to the point in time where the majority of the people will realize that not only have the bureaucracies in business failed, but their government has failed as well. 

I have stated here many times that these economic events are part of the long term economic cycle. Based on the Shumpeteerian creative destruction, and specifically Professor Carlota Perez. Her analysis is based on her research of the last 300 years. I highly recommend reviewing the Perez label on this blog to understand the natural process of the old moving out of the picture and the new, in this case Information Technology, pulling the weight of the economy. 

All seems to be going to plan, exactly as Professor Perez stated in 2005. Providing the best reason of all for getting involved in People, Ideas & Objects, so please join me here . 

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Robert Malone, on MIT video.

Achieving U.S. Energy Security Through Energy Diversity

Robert Malone is the Chairman and President of BP America and is speaking about energy policy in the United States. Going back to the Nixon administration and reiterating some of their goals in terms of where and how the U.S. would source their energy. Stating the attempts to formulate a policy have failed, and now is the time to address this difficult situation. 

Talking about our future and the difficulty in getting people's focus on a national energy policy. Its a market economy, and I think the idea is that you get paid when you explore, develop and produce the product. Looking to the government for the leadership in making the policy changes  to enable domestic supply has provided the U.S. with nothing but the failures going back to the Nixon and Carter administrations. 

I disagree with the argument that the U.S. is spending too much on foreign energy supplies. The cost of a barrel of oil is the deal of the millennium. What the U.S. economy, the most efficient consumer of energy, is able to generate with one barrel of oil is far greater then the cost. The U.S. is the largest consumer of energy, and the largest economy in the world. We need to stop thinking in terms of the costs of energy and think more in terms of the value. This requires that we begin to understand and use energy in the most efficient methods possible to fuel our economy. One of the dumbest ways we spend our energy is in gridlock each day twice a day, in order for our supervisors to take attendance. What we need is systems that enable the user to do their jobs when and where the user is, and when the job needs to be done. This begins with the oil and gas producers sponsoring the software developments contained within the Draft Specification.

I can foresee the future user of People, Ideas & Objects waking up and logging in to the system within the first fifteen minutes of their waking. In comparison today, this simple act of logging into the system takes the average person up to 2.5 hours from their waking. The only analogy that I can draw to this foolish idea of getting to work; is having to drive back home in order to make a personal phone call. Ridiculous, join me here.

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Strategy and Business on Innovation

This article was written by A. G. Lafley the chairman and CEO of Proctor & Gamble, and has many valuable features and information regarding how innovation was implemented into P & G. I highly recommend the article, it can be downloaded from here. The article is introduced by Ram Charan who co-authored a book with A.G. Lafley entitled "Game-Changer: How you can drive revenue and profit growth with innovation". I am only going to review the opening comments of Ram Charan

The opening paragraph captures the relevance to this software development project and the need to enable the innovative oil and gas producer.

THE HEART OF A COMPANY’ S BUSINESS MODEL should be game-changing innovation. This is not just the invention of new products and services, but the ability to systematically convert ideas into new offerings that alter the very context of the business.

The cheap energy era has passed. This much is understood and agreed to by the consuming public and the energy producers. The earth science and engineering disciplines; which are at the heart of the industries value proposition are accelerating in speed and complexity. It is also agreed that the volume of earth science and engineering per barrel of oil is increasing and that it will not become easier to produce. From reviewing Professor Giovanni Dosi's paper in the preliminary research report, we know that innovation generates new science, which produces new innovations and so on. How can a firm based in the oil and gas industry compete on such a dynamic and changing field of knowledge?

One aspect of building an innovation culture deserves more attention than we could give it in The Game-Changer: designing a social system that would spark new ideas and enable critical decisions. In the article that follows, A.G. explains the human factors that fostered innovation at Procter & Gamble. It could be thought of as the “missing chapter” to The Game-Changer; a vital component that isn’t always obvious, even to experts, precisely because it is so fundamental.

And for oil and gas that has to be the user-based development of the People, Ideas & Objects application, based on the Draft Specification. 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.

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Marshall Carter on MIT Video

A new video worth watching from MIT has Marshall Carter, Chairman, Board of Directors, New York Stock Exchange Group, and Director, NYSE conducting a case study in the changes he implemented.

Before I get into this video I want to communicate the process this software development project is taking.

• May 2004, Publication noting the Joint Operating Committee was the legal, financial, operation decision making and cultural framework of the oil and gas industry. And was the means in which the oil and gas industry would become innovative.
• May 2004 to December 2007, research into the validity and requirements of a system to support the innovative oil and gas producer.
• December 2007 to July 2008 Publication of the Draft Specification.
• July 2008 Determine the current management, systems and leadership are failing societies demands for energy.
• August 2008 Define and develop sources of revenue. Commence development (defined below)

Marshall Carter in setting out his case asks the following questions. I have answered these same questions from this software development projects point of view.

1) How do we know when to change?

There has to be a wide consensus that now is the time to change the current management and systems within the oil and gas industry.

2) How do we know when to launch our new strategic direction?

When the problem is evident to every energy consumer and every energy investor that the current course is a dead end.

3) How did we do it.

In a few years we may be able to answer this. I would suppose that the timetable above adds some clarity as to what has been done and where we are going.

4) How did we convince employees.

Most of the users and developers are sourced from the energy companies themselves. This is necessary as they are the ones that know and operate the business. They are also aware of the current situation and direction at the oil and gas company is futile and may not survive the disruptive changes that the industry will be going through.

5) How much effort would be needed to ensure the changes stick.

I believe that the Draft Specification answers many of the questions of what fits where. It also answers many of the problems that are systemic in the industry today. This system is the most logical means for a producer to operate. Therefore the natural tendency of users is to default towards the Draft Specification.

Marshall Carter then states that it was necessary to "build a vision from the bottom up". If anything, I think the hostility that management has shown to this project, and the hostility that I have been able to return prove this is not a "top down solution".

Carter also states "show those that resist change, that change is irresistible." I think forward progress of this software development project will soon prove to the management their way is dying. The following eight items are what Carter suggests is necessary for leading successful change. My response to each point is provided.

Leading Successful Change

• Sense of Urgency

There is no greater sense of urgency then the one that the energy consumer currently faces.

• Guiding Coalition

The use within this project to use the collaborative tools and methods to make this project a result of the users and developers who work within oil and gas. What has not been expressed before is an appeal that I think resonates with the users. Users have ideas on how to make things better. They don't have access to change the Information Technologies that they are required to use. This software development project enables them with a software development capability, source of revenue and chance to affect change within their area of work.

• Vision & Strategy

A vision and strategy that is grounded in the research and academic thinking. A strategy and vision that captures the possibilities of the Information Technologies available to users today.

• Communicating the Change Vision

Blogs and Knol's are powerful tools for reaching out to like minded groups.

• Empowering Broad based action.

This is more of a personal decision for the users and developers to make. No company or manager needs to approve their participation here. People with Ideas and who need software Objects to help them do them their jobs.

• Short Term Wins.

We can move to provide the short list of development targets (listed below) within a reasonable period of time.

• Consolidate Gains and Provide More Change.

The development targets should enable the community to move further and faster then they ever believed they could.

• Anchoring new approaches in the culture.

Using the Joint Operating Committee is enabling the use of the culture of the industry. If this is a requirement of successful change, what does that say about this software development project?

Marshal Carter towards the end notes that what gets measured gets done. So I want to set out these short term targets for the community.

• Establish a user based definition of security and access control requirements.

• Establish "User Archetypes" that implement the Military Command & Control Metaphor.

• Develop and test the Security & Access Control module using Sun's Federated Identity and Project Hydrazine.
• Go live with the users of this systems as soon as possible. Iteratively improve the products user interface, performance and security to meet and exceed user based standards.
• Resell the security offering under license to other industries.
• User based Wiki development towards final specifications.

Lastly Carter notes "Engineering systems at this point is a thinking [and building] process which allows you to identify and solve problems". So lets get to work. Find people to donate and participate in this project, and join me here.

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