Showing posts with label Management. Show all posts
Showing posts with label Management. Show all posts

Wednesday, August 03, 2011

New Position, President


Thinking through the organizational structure of the People, Ideas & Objects management. I have come to the conclusion that with the work that we are undertaking here that it would be better to have some additional “bench strength” in the executive. That is why I am creating the position of President, a role that I was to previously fill, to help round out the team.

The position of president will be an officers position and will involve this individual providing their strengths in areas where the firm needs more resources. When we think about the type of work that we are undertaking, the probability that we are finding areas that need attention are many, and the manner of that attention is not minor in its importance. The ability to put an officer on the situation and get it up to speed quickly would be a great help to the organization.

So that is what we are going to do. The position of president of People, Ideas & Objects will be added to the list of individuals that we will be looking to add to the organization once we secure our budget. These positions are open to all that may wish to apply for them and are permanent full time, or available as secondment from our participating producers.

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. Email me here if you need an invite.

Sunday, July 24, 2011

McKinsey, Dan Ariely on Irrationality


Another short McKinsey article to fill out our first week back. This article provides a different perspective on some every day points of view in business. Its a little light hearted but I think you’ll enjoy it.

http://www.mckinseyquarterly.com/Dan_Ariely_on_irrationality_in_the_workplace_2742?pagenum=1#daninteractive


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. Email me here if you need an invite.

Tuesday, July 19, 2011

So What is Phase-Two

As we begin Phase-Two we see People, Ideas & Objects move away from our heavy focus on research. And turn our attention to the commercialization of the Intellectual Property (IP) contained within that research and this communities development. This is done with the objective of completing the Preliminary Specification and ultimately building the software that is defined there. With this blog post I have now updated the knol where the Preliminary Specification is listed. There is now a thorough understanding of the requirements of what people will need to see in order to participate, and the key deliverables of the Preliminary Specification. It’s still brief, but that’s the point, it has to be.

One of the key points noted is the budget for the Preliminary Specification has been set at $100 million. The controversial nature of the size of this budget will lead to much discussion. However, the more time and energy spent at the beginning in these tasks the less that will be spent in the long run in terms of actual development. These Preliminary costs also represent as little as 5 - 10% of the total software development budget. I don’t want to pollute this blog or the knol with discussion about the budget and therefore ask if you have comments to direct them to my email here.

The source of these funds for the Preliminary Specifications budget is based on the 2010 and 2011 fees and penalties that have been assessed at $1.00 per year and $3.00 per year, per barrel of oil equivalent, per year. Please see our Revenue Model for more information. Therefore if a producer was producing on average 40,000 barrels of oil per day over the past two years, the costs for them to participate in the development of the Preliminary Specification would be (2010 $160,000 and 2011 $160,000) = $320,000 for the two years. These costs are for the software development; and provide the producer with the opportunity to have their needs specifically addressed in the software development process. Today its not enough to own the oil and gas asset. You must also have access to the most efficient software systems that make the oil and gas assets profitable. Having direct participation in the development of that software will be an additional competitive advantage for the producer. That's what People, Ideas & Objects are offering.

One key change in the Phase Two proposal is that we have centralized all of our operations in Houston. The President, COO, CFO, VP Community Development, VP Development, and VP Business Development will be based there as will all of their teams. (Previously the development team was to be in California). Houston provides the ideal location if during the Preliminary Specification the scope of the application is determined to be an “Americas” based or “Global” based solution. (P.S. Now would be a good time to start thinking about the many positions discussed in the proposal. People, Ideas & Objects (PI&O’s) will consider people for direct hires and those that are seconded from participating producers.)

In an April blog post we noted that management were too conflicted to participate in the financing of this project. That we were instead turning to the ownership class to fund our capital needs. Phase Two is not a development term but a business term of moving to a more mature foundation. It is not that we're seeking to source our funds directly from the ownership class but to have the ownership class direct management to participate. Doing "something" comes down to industry supporting PI&O's Revenue Model. Only then will anything substantial begin. People, Ideas & Objects revenue is based on a producers reasonable share of the costs of software developments, not on PI&O's cash balances.

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. Email me here if you need an invite.

Friday, January 07, 2011

Organizational and Change Management Resources

Today we have two articles that focus on the topic of change management and organizational change. The first article presents the results from a survey from McKinsey and is entitled “Taking organizational redesigns from plan to practice: McKinsey Global Survey results

Organizations often redesign themselves to unlock latent value. They typically pay a great deal of attention to the form of the new design, but in our experience, much less to actually making the plan happen—even though only a successfully implemented redesign generates value. A recent McKinsey survey examines the reasons executives cite for successful and unsuccessful implementations, and in doing so, offers one set of explanations for why organizational transformations so rarely succeed. This survey asked why organizations redesigned, what challenges they faced, what tactics they used for implementation, and how the redesign and its delivery affected employee morale and shareholder value.
The second article is from Booz & Co. Strategy + Business and is entitled “Making Change Happen, and Making It Stick
Few organizations have escaped the need for major change in the past decade, as new technologies and global crises have reshaped entire industries. However, the fact that change has become more frequent does not make such changes any easier.
As we noted this past week, People, Ideas & Objects are not change agents but solutions providers. These documents provide industry with a hint of the organizational and change management resources that are available.

It is now time for producers to act. Review of our Revenue Model will inform producers how they can participate in the development of People, Ideas & Objects Preliminary Specification. Producers can contact me here for further information, or to begin the process of their participation.

Tuesday, November 23, 2010

McKinsey, Global Forces Shaping Business and Society

Once again McKinsey have impressed with a thorough summary of the situation in the global economy. This video presentation is very high level and only touches on individual points. However provides an overall summary and captures a spirit of the global economy and its future direction. To me these McKinsey partners are discussing the future economy and the ways and means of how and what of how people will earn there way in the world.

A fascinating and well presented discussion I highly recommend bookmarking the video.


Monday, November 15, 2010

McKinsey on Creating Value

In a world where Cash-for-Clunkers and QE II are considered solutions to what ails our economy. It is refreshing to see this presentation by McKinsey Consulting. This presentation is talking about the ways that value is created and destroyed in firms. Although the video at times seems to stumble, it is only in the presentation of difficult material that makes it appear that way. What is being discussed are advanced concepts that need to be adopted by innovative oil and gas producers.

McKinsey identifies four of the mechanisms that generate and destroy value in business. In the Preliminary Research Report it was noted that focusing on growth as a strategy may not generate the value that a producer firm needs. That innovation is a strategy to optimize the value of the producer firm is the focus of People, Ideas & Objects.

In a related paper, McKinsey relates the difficulty for firms to focus on value generation.

It’s one thing for a CFO to understand the technical methods of valuation—and for members of the finance organization to apply them to help line managers monitor and improve company performance. But it’s still more powerful when CEOs, board members, and other non-financial executives internalize the principles of value creation. Doing so allows them to make independent, courageous, and even unpopular business decisions in the face of myths and misconceptions about what creates value.
The Draft Specification provides two modules that make these calculations and enable these decisions to be made, the Performance Evaluation, and Analytics & Statistics modules. These two modules functionality are very similar. The key difference is that the Performance Evaluation module deals with the producer firm and the Analytics & Statistics module views data from the Joint Operating Committee perspective.

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.

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Monday, September 27, 2010

McKinsey, The Psychology of Change Management

McKinsey, once again, have published an article that provides real value and discussion to the work we are doing here at People, Ideas & Objects. Change is a difficult process to manage. This article discusses the psychology around change management within organizations, and therefore is relevant, but I want to mention a few aspects of People, Ideas & Objects unique perspective before we review this paper.

There are two types of changes that affect organizations. The first type of change is to steer the ship in a new direction, one that is believed to be the better choice for all concerned. The second type of change is the type that is forced upon an organization by events that are beyond the control of anyone. People, Ideas & Objects is oriented to the second type of change. One that addresses the scope of the forces of change that are being exercised on the oil and producer.

The forces of change that are currently being asserted on the oil and gas producers are significant. The change in oil and gas prices affects all aspects of a producer firm. At the same time the volume of engineering and earth science effort per barrel of oil continues on a steep upward trajectory. A third major change that is occurring is what I would call the maturation of the Information Technologies (IT), bringing new and innovative ways of doing business. These are of the type of changes that are seen once a century. Fundamental changes that have the power to re-configure the makeup of an industry.

To accommodate the changes that are acting against the producer firm, People, Ideas & Objects prescription is to align the producers internal processes. By simply moving the compliance and governance frameworks to be in alignment with the Joint Operating Committee’s legal, financial, operational decision making, cultural and communications frameworks. Our research has shown that this alignment increases innovativeness and accountability, to name just two of the key benefits.

Alternatively, left unaddressed, these changes will soon cause producers to outspend their revenue streams. These losses will also exercise the type of change that is needed within the producer firm and the oil and gas industry. Producers therefore need to choose to ride these forces or continue to resist them. Either way that these changes are made, People, Ideas & Objects will provide the systems and applications that provide the innovative oil and gas producer with the most profitable means of oil and gas operations.

Our claim to be the most profitable means of oil and gas operations is a bold statement. And we assert that this is provided through our value proposition and the enhanced division of labor the software will identify and support. By allocating the one time development costs across the producer base, the costs of software development will fall to a small percentage of what firms have traditionally paid for ERP systems.

With respect to the second component of our claim to being the most profitable means of oil and gas operations. For any industry to increase its economic output demands that an enhanced division of labor be used. This economic theory has been proven time and again over the last few hundred years. We now live in times where to expand on the current division of labor and specialization requires that advanced Information Technologies be employed to identify and support them. People, Ideas & Objects is configured to develop the software that will provide these to the producer firm. This is our fundamental competitive advantage.

McKinsey’s discussion on change is of the first type, or deliberate change an organization undertakes. Nonetheless it provides us with some valuable information regarding change in general.

Over the past 15 or so years, programs to improve corporate organizational performance have become increasingly common. Yet they are notoriously difficult to carry out. Success depends on persuading hundreds or thousands of groups and individuals to change the way they work, a transformation people will accept only if they can be persuaded to think differently about their jobs. In effect, CEOs must alter the mind-sets of their employees—no easy task.
People, Ideas & Objects have presented a workable vision of how the innovative oil and gas producer would operate. This vision is represented in the Draft Specification. People can then see the effect of working in that environment and adjust their actions to fulfill that vision and enable the innovative oil and gas producer.
But what if the only way a business can reach its higher performance goals is to change the way its people behave across the board? Suppose that it can become more competitive only by changing its culture fundamentally—from being reactive to proactive, hierarchical to collegial, or introspective to externally focused, for instance. Since the collective culture of an organization, strictly speaking, is an aggregate of what is common to all of its group and individual mind-sets, such a transformation entails changing the minds of hundreds or thousands of people. This is the third and deepest level: cultural change.
With the benefits of people having this vision in mind. And using the Joint Operating Committee as the key organizational construct of the innovative producer, people will be able to think differently about their work.
Employees will alter their mind-sets only if they see the point of the change and agree with it—at least enough to give it a try. The surrounding structures (reward and recognition systems, for example) must be in tune with the new behavior. Employees must have the skills to do what it requires. Finally, they must see people they respect modeling it actively. Each of these conditions is realized independently; together they add up to a way of changing the behavior of people in organizations by changing attitudes about what can and should happen at work.
In this next quote McKinsey note that cognitive dissonance will affect the people who believe in our purpose. I can only suggest that those people begin the process of joining People, Ideas & Objects or the Community of Independent Service Providers.
The implication of this finding for an organization is that if its people believe in its overall purpose, they will be happy to change their individual behavior to serve that purpose—indeed, they will suffer from cognitive dissonance if they don’t. But to feel comfortable about change and to carry it out with enthusiasm, people must understand the role of their actions in the unfolding drama of the company’s fortunes and believe that it is worthwhile for them to play a part. It isn’t enough to tell employees that they will have to do things differently. Anyone leading a major change program must take the time to think through its "story"—what makes it worth undertaking—and to explain that story to all of the people involved in making change happen, so that their contributions make sense to them as individuals.
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.

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Wednesday, September 22, 2010

S + B, Big Oil and the Natural Gas Bonanza

Booz & Co’s periodical Strategy + Business have published a paper that asks the question;

The oil majors hope to make major money in natural gas, but can they learn to operate two distinct types of businesses under one roof?
Noting that unconventional gas requires a different business model that may not be served by the conventional methods of the industry.
The unexpected revival of natural gas is quietly precipitating a fundamental shift in the oil and gas industry — a shift that few companies were prepared for but that may determine the industry’s overall future makeup. It pits the major oil companies against the independents, which have plied the unconventional reservoirs doggedly over the last seven to 10 years. And it raises questions about whether the oil giants can become big players in this new unconventional gas business. To do so, they will have to develop dual operating models under one roof — one, a traditional high-risk, corporate-led exploration model, and the other, a nimble, efficient, and decentralized operation. In other industries (notably airlines), such two-headed strategies have generally failed.
Change is certainly in the air. Oil and gas prices are probably one of the best measures of the level of change in the oil and gas industry. It is pleasant to see Strategy + Business’ analysis providing confirmation to many of the things that we have stated here. This critique is to ensure the innovative producers remain successful.
In order to compete in unconventional assets, oil majors will have to embrace a dual operating model — in essence, pairing traditional operations with separate and more agile business units modeled after the independent gas firms, with flatter organizations, simpler governance structures, and an emphasis on efficiency and innovation. These attributes are necessary to reduce operating costs, as well as to allow the firms to quickly adapt new well designs, source local contractors and materials, and secure labor as needed.
What concerns me is the nature of the oil and gas industry towards new ideas. There is a culture of how management will not support new ideas, which includes this software development project. I have attributed this to the 1980’s and 1990’s survival strategies that were a necessity in oil and gas. Times have changed and its time for the management to realize they have to act. S + B note.
Above all, management will need to ensure that existing processes and structures do not discount these fresh ideas because of a “not invented here” bias. If a joint venture is part of this approach, the company will need to develop a plan that allows it to learn from the arrangement, by creating formal and informal governance mechanisms to promote the transfer and dissemination of knowledge.
I am under no illusions at the scope of change that we are introducing in this project. Using the Joint Operating Committee as the key organizational construct of the innovative producer will be necessary at some point in the very near future. An idea that resonates with those in the business as something we should have been doing all along. By delaying this project, one in which we have many years of work ahead of us, I believe is dangerous.
If designed and managed appropriately, either strategy could be successful, but history suggests that most of the oil giants will struggle to make dual operating models coexist. Though it may not seem obvious today, many of these companies are likely to find that the technical hurdles of unconventional reserves are relatively minor. Far tougher — and ultimately out of reach for some — will be the challenge of changing behavior and culture. 
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.

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Thursday, September 09, 2010

What is Structuration?

The Preliminary Research Report reviewed a variety of papers that fall under the topic of Structuration. What is this and why is it important to People, Ideas & Objects and the innovative oil and gas producer. Here are excerpts from the review and how they affect this project.

Professor Anthony Giddens initially published “The Constitution of Society: Outline of the Theory of Structure”, Berkeley, University of California Press and his theory is well articulated through the following excerpt from “Using the Structurational Model of Technology to Analyze an ERP Implementation” by Olga Volkoff, of the Richard Ivey School of Business.

From the perspective of structuration theory, adaptation is the joint effect of the actions of individuals and the institutional structures within which those actions take place. Structures such as business strategies, organizational culture, reward and control systems, patterns of communication, and professional norms both enable and constrain the daily activities of people, but do not wholly determine them. At the same time, while individuals can choose to act in ways that will either reinforce or alter those structures, their choices are not independent of the structures within which they take action. This “duality of structure” - the recursive (re)production of institutional structures through the ongoing daily social practices of individuals - allows change to emerge in ways that are not wholly predictable. 
I think within this quotation we see the reasoning why the oil and gas producers have such difficulty in meeting the demands of innovation. The Joint Operating Committee holds the “actions of individuals, and the institutional structures” that are not recognized by the ERP systems that are available in the marketplace. Therefore you have two disparate organizations, the JOC and the bureaucracy, operating in two different structures, creating conflict and contradicting one another.

Giddens’ theory of structuration is further define by Professor Wanda Orlikowski’s 1992 comments: “the duality of structure refers to the structure of social systems: human actions create a social systems institutional properties and these properties then serve to shape future human actions.” The notion of structuration has three aspects.

  • It refers to a social process that involves the reciprocal interaction of humans with the structural features of an organization. 
  • Human actions are enabled and constrained by structures, yet these same structures are the result of previous actions.
  • Structural properties mediate human action and, at the same time, are reaffirmed through human use. In other words, institutional properties are both the medium and the outcome of interaction.

The Preliminary Research report looked at structuration from the perspective of how the current oil and gas organizational structure is defined through the social, legal and environmental influences that provide that structure, and of how the organization in turn provides structure to the social and human elements. People, Ideas & Objects are focused on building ERP systems that identify and support these organizations.

The JOC has explicit legal, ownership, financial and procedural authority and control of the field operations as the standard of operations and conduct in oil and gas, on an international basis. Financial investment in an oil and gas property qualifies for participation on the committee where the operational control is agreed to and implemented. This research asserted that this operational control has significant implications on the internal operations of the participating organization. The facility design, capital budget, legal agreements and the decision making processes are constrained, Giddens’ theory would suggest, by a variety of forms and structures that comprise the basis of operations for the entire industry.

As Thomas Davenport noted in his paper “The Strategy and Structure of Firms in the Attention Economy” 2002,
Strategy and structure are mental constructs, important not in themselves, but for their impact on the people in the organization. Strategy and structure are also the vehicles for focusing attention. 
Clearly stating that by moving the compliance and governance frameworks of the bureaucracy to be in alignment with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. This realignment will eliminate the conflict and contradictions that occur between the two organizational constructs. This realignment will also increase the attention and focus of the individuals involved within the producer firm and the JOC, and by moving compliance to be in alignment with the operational decision making authority, accountability is enhanced. Lastly, as we will document as this review progresses, innovation is enabled.

Another key component of Giddens theory is that there is an inherent risk of failure if the progress of one element is out of step with the other two. Society, organizations and people need to move in lock step to avoid failure. This has been explicitly interpreted for the purpose of this research that the progress of society and people is either inhibited or facilitated through the actions that form the organizations. Currently individuals and society are dictating larger volumes of energy be sourced and provided by the market. If the bureaucracies that exist today, are unable to meet these demands then we will most certainly see failure.

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.

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Wednesday, August 04, 2010

A Quick Break

A quick break from documenting our revenue model to highlight a blog post from our favorite researcher. Professor Richard Langlois’ work has provided a solid foundation for the Draft Specification. In a recent blog post Professor Langlois posted an interesting commentary about the discussion that “might have” taken place at GM in the 1920’s. It’s an entertaining read and is probably based wholly of the facts of the case.

The point of the argument is the change that needs to take place at GM. The “owner” of GM is faced with a new management theory about the role of management in controlling the ways and means of the corporation. “Sloan” who might be Alfred P. Sloan, the CEO of GM during the time that management theory was developed and applied, is interviewed by the owner about these new theories.

We are having this same argument today. Management has ceased to be capable of building value within our organizations. Just as the “owner” of GM had to cede to management, management needs to cede to the market definition. People, Ideas & Objects Draft Specification is the means for management in oil and gas to cede to the marketplace. Professor Langlois’ article is located here.

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

Tuesday, July 27, 2010

Hofmeister on BP's plans

Former Shell Oil Company president has the following comments on Bloomberg today.

It's very important for BP to turn the page so to speak, although they still have the well to put out, and hopefully that will go according to plans over the next couple of weeks. But they have to turn their attention to the future. And part of that future in addition to the asset sales is getting on with what I call the boring bits of business, and that is, under John Browne they did a great job of expanding the portfolio and growing the company. But I don't think they ever integrated the company and turned it into a high performing institution, that takes a lot of time and Tony Hayward saw this and started the process but didn't get far enough. Now I think its time to really get into the structures, processes, systems the procedures so that the whole company operates the same way all over the world
Makes at least two people that think the boring bits of business are needed.

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Friday, July 02, 2010

The Scope of the Application

In a recent post we talked about the scope of the development in terms of the Preliminary Specification. Today I want to discuss the scope of the application itself. It may seem that these are the same points, however, I think that there is enough of a difference to warrant this post.


To provide the innovative oil and gas producer with the software tools they need, the end user needs to be involved in the design and development of those systems. People, Ideas & Objects is focused on the end user in its developments. Organized around a comprehensive vision of how and what the systems consist of, the Draft Specification details the vision of the application. Organizing the user in these developments has been our priority throughout these developments. Anyone proposing the development of systems for innovative oil and gas producers would have to include the user in this manner. Yet People, Ideas & Objects is the only software developer that is focused on the user. Does SAP provide a comprehensive development of systems based on user input? Do the current bureaucracies believe the issues of the oil and gas industry can be solved without comprehensive user based software developments?


People, Ideas & Objects fills the traditional “ERP” or Enterprise Resource Planning classification of applications. It is a comprehensive solution designed to manage the operations of Joint Operating Committees and producers needs for accounting, administration and management. The Draft Specification defines the general framework of the application. It is anticipated that most, if not all, employees of a producer firm, the service sector and partners of Joint Operating Committees will have access to the application. The various disciplines that are employed in an oil and gas firm, geologists, engineers, landman, accountants and others are included in this definition.


In the People, Ideas & Objects software applications we seek to capture the ways and means of the optimal innovative oil and gas producer. The understanding of the industry is beyond the scope of a handful of contributors and involves the multiple disciplines noted earlier. The collaborative output of the application is well beyond the scope of one individuals understanding of the industry. Therefore clarification and compromise will be a necessary and difficult part of the process. Using advanced business techniques, focused on the conflicts and contradictions that arise, the output will resolve many of the issues within the industry and its application to the Draft Specification. This is a business design process that will involve literally everyone and anyone with experience and understanding of the oil and gas industry. More specifically it is a place where people can contribute their ideas and build their own service based offering in support of the innovative oil and gas producer and end users of the developing People, Ideas & Objects software.


Producer firms also have a critical role to fill in these developments. Their participation helps to define the applications scope of operations. Will the applications include the geographical regions of each area of operations of a producer firm? Will the applications include the types of oil and gas operations that the producer participates in. Without direct participation of the producers in funding and defining the scope of the application, the producer may or may not have all their regions and operations covered. This why the producer needs to participate in these developments now. With the Preliminary Specification set to start on January 1, 2011, and include the scope of the application, now is the time for producers to begin the process of supporting and participating in these developments.


Adding to the scope of the application is the market definitions of the producer firms targeted. The application is proposed to work for International Oil Companies (IOC’s), National Oil Companies (NOC’s), Independents and Start-ups. Using the Joint Operating Committee as the key organizational construct provides value for all producers in the industry. To preclude any market definition would unnecessarily limit the scope and value of the application. Joint Operating Committee’s include all types of producers. Producers need to participate in these communities and ensure their operations geographical and operational needs are met. If you have comprehensive operations, working within these communities at the onset provides real value.


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

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Tuesday, June 15, 2010

Intellectual Property Management

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

  1. Ensuring that they are participating within the authorized industry initiative as represented by this IP. As these provide the consolidation of the industry initiative and represent an investment by each producer firm.
  2. Ensure that they are not dealing with an un-licensed and non-authorized software development team or community. As these avenues offer no future for the producers investment.
Participation with an unauthorized firm is at the producers sole expense. Producers concerned with the validity of an individual, group, community or firm may email me for further clarification. Every attempt to identify any individual, group, community or firm that are un-licensed will be made by People, Ideas & Objects. Licensed providers are clearly listed on our internal wiki.

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

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Monday, June 14, 2010

World oil production has declined.

Within this post I discuss the current situation with respect to how global oil production has declined. I assert in this post that management must now act to avoid the perception of conflict, and must act to fund People, Ideas & Objects.

In May 2004's Preliminary Research Report I proposed we research the following hypothesis.
  • The corporate hierarchical organizational structure is an impediment to progress and most particularly, innovation.
  • Determine if the Industry Standard Joint Operating Committee, modified with today’s information technologies, provides an oil and gas concern with the opportunity for advanced innovativeness.
It was through the research of this hypothesis that it was implicitly held that the bureaucracy would cease to provide the market with adequate energy. That day is now closer then we expect, and the time in which to act is upon us. If we do not act in a reasonable period of time, then the economy that we know today, will truly be history. Our first action is to prepare to organize ourselves for the challenge of turning around the productivity in world oil production, and then increasing it substantially to meet the prospective needs of all people.

The Issue.

After five years of static oil production, the U.S. Energy Information Administration (EIA) are reporting that global oil production has declined in 2010. In the chart below, 2010 production can be seen to have declined. This is a significant event in the history of the petroleum industry. As most would predict, I see this decline in production as a direct result of the systemic failure of the bureaucracies in oil and gas, and tacit support for our hypothesis.




It might be argued that the recession is having a detrimental effect on energy demand, however, I think that is an incorrect conclusion. I think it is fair to assume that the prior five years of static oil production was the cause of the run up in the price of oil. Add to this the world economies have resumed a reasonable level of growth, therefore demand would be growing, not in decline. What the chart reflects is an approximate one million barrel drop in production. I believe this is the beginning of the downturn in global oil production. To say that I have a vested interest in selling this system to the oil and gas industry is correct, and that therefore I am biased is also correct. However this fact is perceived, I think action is necessary to begin the developments of People, Ideas & Objects software.

Seizing the Moral High Ground.

I believe the management of oil and gas companies are conflicted. The less they do about the expansion of oil and gas deliverability, the higher the oil and gas prices, and the better they appear as managers. This conflict has been in play for the past five years. With the overall decline in production now upon us. It is time for the management to assume their moral and ethical responsibility to increase global production. This can only be done by expansion of the industry through the proven economic principles of a further division of labor and specialization. Economic principles that we have used in the development of the Draft Specification. Organizing around the Joint Operating Committee, and in a manner for the industry to expand its output.

Management are now being called to do the right thing. Eliminate their conflict and financially support People, Ideas & Objects. During the past five years the bureaucracies that operate the oil and gas companies have stated that the static nature of oil deliverability was not their problem. Their focus was on their own business domain, and that was all that they could consider. Now this situation has changed in a fundamental way. If it is not the oil and gas industries problem, as to how to deliver the market demand for energy, who's is it? The need to move the industry from the perspective of "minding your own business" to the moral and ethical issues associated with a real decline in energy production must begin.

Our recent past has shown that oil and gas companies have chosen not to participate in these software developments. Effective April 1, 2010 our appeal had been re-directed towards those oil and gas shareholders and investors that know there is a better way. Effective today this too has changed. As of today, we are focusing our funding efforts on the bureaucracies management. Invoking their moral and ethical duty that everything be done to ensure the world has adequate energy supplies.

Adam Smith and the Division of Labor.

Funding is required to begin the developments of the software and communities that are part of the People, Ideas & Objects initiative. If we continue to just throw money at the bureaucracies, we will not get anywhere. Our approach to reorganizing the industry must be based on the proven techniques and economic principles of Adam Smith's division of labor and specialization. Just as Adam Smith was able to prove his theories by reorganizing a pin factory, and in the process increase pin production by 250 times. Through use of these same principles, by way of the development of People, Ideas & Objects software, the industry can increase its deliverability of oil and gas.

Build the Software.

Why we need to build software to solve this problem is due to the fact that organizations in our modern economy are defined and supported by software. To state that People, Ideas & Objects is the software that identifies and supports the innovative oil and gas producer, and is counter to the argument that SAP is the bureaucracy. Within the Draft Specification we are moving towards the culture of the industry, the Joint Operating Committee, which is the legal, financial, operational decision making, cultural and communication frameworks of all global oil and gas producers. By recognizing these facts and aligning the hierarchies compliance and governance to the JOC, innovation and speed of operations are the results.

We need to begin the funding of these software developments. Initial development costs have been budgeted in the $700 million to $1 billion range. The method for funding these costs is based on an annual levy of $x / barrel of oil equivalent. That levy has been set at $1.00 for 2010, potentially (conceptually) raising $120 million in one year. Further information on how to participate is located here.

I see these developments as an important turning point in the history of the oil and gas industry. Seeing that our hypothesis has been proven correct. Producers that subscribe to these developments would gain an operational and financial performance benefit from being involved in this software development project. Action to fund these developments is required. 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. 

In Summary

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

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Monday, May 31, 2010

Langlois, Return of the Entrepreneur Part II

In Part I of our review of Chapter 5, "The Return of the Entrepreneur" we discussed the extent of the oil service industry in terms of how it provides the oil and gas producer with its various products and services. I argued that the manner in which they are operated today was eerily consistent with the way the former Soviet Union was managed. Just as the former Soviet Union failed from too centralized control of the commanding heights of the economy. Attempts at centralized management in oil and gas provide many of the same symptoms and outcomes. I have argued here that the oil and gas companies are too involved in the development and planning of what goes on in the service sector. Spending money only for successful innovations that are approved by their management, little if anything from a field level innovation are being developed. For example, if not for the persistence of the individual behind Packers Plus, its doubtful that unconventional gas would exist.

Professor Richard N. Langlois argues in this final installment of his book "The Dynamics of Industrial Capitalism". That Adam Smith's "invisible hand", which was replaced by Alfred Chandler's "visible hand" of management are now being replaced by Langlois "vanishing hand". That markets are the more effective means of managing of day to day operations. This discussion is particularly relevant in the oil and gas service sector, where the majority of the innovation needs to occur. With oil and gas generating over $3.3 trillion in annual revenues, the market is the appropriate location for further development of the industry.

The end and the beginning of history.

Langlois argues in this first quotation that the last 25 years has seen the decline of the large managerial corporation. This may be the case in many industries, however due to the producer firms generating the entire revenue streams of the oil and gas and service sectors, management have maintained their dominant position. This has been at the expense of the innovativeness and speed in the service sector. What we see in the Gulf of Mexico is a pace and thought process that shows the same symptoms of the decline of the former Soviet Union. Reliance on centralized control by the oil and gas management have left little in terms of getting things done.
In the era Chandler chronicles, the large managerial corporation clustered into an important and perhaps dominant place in that population. In the last quarter century, the relative importance of the large managerial corporation has declined, as has its typical level of vertical integration – which makes the population of arrangements today begin to look a lot more like the antebellum one. p. 72
How the producer could benefit from a new perspective on the market is contained within the Draft Specifications Resource Marketplace, Research & Capabilities, and Knowledge & Learning modules. Review of these modules will show the information that is developed and shared between the producers and the service providers. Where ideas can be developed and acted upon in a manner that provides value to the industry.
But the hypothesis I offer here is a bit more subtle, or at least a bit more complicated, and arguably more general. In my view, the phenomenon of the Vanishing Hand is a further continuation of the Smithian process of the division of labor on which Chandler’s managerial revolution was a way station. Thus the Vanishing Hand is driven not just by changes in coordination technology but also by changes in the extent of markets — by increasing population and income, but also by the globalization of markets. Reductions of political barriers to trade around the world are having an effect analogous to the reduction of technological barriers to trade in the America of the nineteenth century (Findlay and O’Rourke 2002). Is this a revolution or the continuation of a long-standing trend? Again, the answer depends on one’s perspective. My argument is that, just as the American “globalization” after the Civil War was revolutionary in its systemic reorganization of production toward standardization and volume, the new era is revolutionary in its systematic de-verticalization in response both to changes in coordination technology and to plain-old increases in the extent of markets. p. 73
In a globalized oil and gas marketplace, producers would benefit from innovative products and services that were developed elsewhere by others. Through the People, Ideas & Objects modules mentioned, they would be able to engage with those service providers and build value in their reserves and production by applying those developments. The Draft Specification would also provide them with the means to further develop their ideas of what might work in their properties. The producer firms building value by enhancing their production and reserves. The service industry firms building value by marketing new and innovative solutions to the global oil and gas industry.

To achieve this realignment of the industries, Langlois makes clear that the market and market supporting institutions are what are needed. Market supporting institutions such as People, Ideas & Objects Draft Specification.
It is a major part of my argument that, as the extent of the market grows, markets (and market-supporting institutions) can take over many of the buffering functions of management. “In the beginning there were markets” is Williamson’s famous heuristic dictum (Williamson 1975, p. 20.) For him, a fair comparison between markets and hierarchies implicitly requires us to assume that the same capabilities are available through contract as would be available to hierarchy. I have been at pains to suggest that, from a historical and evolutionary perspective, this heuristic leads us astray. Especially in times of significant economic transformation, internal organization may arise precisely because the relevant capabilities are not cheaply available through contract. As time passes and the extent of the market grows, however, we should expect markets (that is, “contracting” broadly understood) to become more “capable” (Langlois 1992). As time passes, all other things (including extent of the market) equal, the outlines of new capabilities will become sharper; activities will become more routine and better understood; and capabilities will thus begin diffuse to others. Moreover, economic agents can be expected to discover techniques other than integration for mitigating problems of asymmetric information. As the extent of the market grows, all other things (including knowledge) equal, it will pay to incur the set-up costs that markets and market-supporting institutions (like formal standards) require. Moreover, as markets become thicker, assets are likely to become less transaction specific (because there are many more potentially similar transactions) and relative minimum efficient scale is likely to decline in general. In the end there are markets. pp. 76 - 77
Chandler has shown that management needs buffers to deal with the supply and demand for their products. Buffers such as inventory and supply chains. In markets these buffers, which is the primary role of management, are limited.
Over time, two things happen: (a) markets get thicker and (b) the urgency of buffering levels off and then begins to decline. In part, urgency of buffering declines because technological change begins to lower the minimum efficient scale of production. But it also declines because improvements in coordination technology — whether applied within a firm or across firms — lower the cost (and therefore the urgency) of buffering. p. 78
There is little that I can think of in terms of how significant this level of change would require. Possibly this is why we need to see the complete failure of what has been built before. The culture of the industry is not something that can be changed at will. The decline of the management within the oil and gas companies might be a necessary precursor to the rise of the markets as discussed in this post. Given adequate time, that will happen. What we need to ask is, do our time lines allow for the maintenance of the global deliverability of oil and gas?
This is the Vanishing Hand. Rather than being a general historical trend, the managerial revolution -- in the interpretation -- is a temporary episode that arose in a particular era as the result of uneven development in the Smithian process of the division of labor. p. 78
This next quotation is the final paragraph in Langlois book. We have learned a significant amount from his writings. Selection of the Langlois label will aggregate 55 posts that have been written in the past few years. Langlois writing helps provide a direction in which we can take the oil & gas and service sectors. It is difficult at times to conceive of doing just that, however, removing energy production from our advanced economies will leave us with much more difficult choices.
Chandler’s great contribution was to provide an intellectual framework for the field of business history. The exercise I have set for myself is to rethink Chandler while remaining a Chandlerian (and a Schumpeterian), that is, while attempting to provide a larger intellectual frame for organizational change. Obviously, casting complex historical transitions in terms of simple diagrams is a dangerous gambit; but it does provide a valuable heuristic and a way of calling attention to the importance of factors like the extent and evolution of the market and the changing nature of the coordination problem organization has faced. For more than 200 years, economic growth has been a durable trend in the United States. The same is true of the expansion in the extent of the market and the elaboration of the division of knowledge. Indeed, these trends may be the most significant facts of modern economic and organizational life, even if we often take them for granted. Using these trends as initial (or boundary) conditions in explaining organizational choice is not historicism. But failing to take them into account is ahistoricism. pp. 78 - 79
We will prepare at least one more post on Professor Richard Langlois. This will be on his presentation slides. Review of these slides will provide us with a strong recap on all that we have learned here. 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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Sunday, May 30, 2010

Langlois, Return of the Entrepreneur Part I

We now turn to the final chapter "The Return of the Entrepreneur" in Professor Richard Langlois' book "The Dynamics of Industrial Capitalism". What we are doing by moving to the Joint Operating Committee is recognizing the partnership of the property that is held by various oil and gas firms. Moving away from the traditional "corporate" perspective of dealing with the compliance and governance of one producing firm owning many interests in many JOC's. Firms will continue to hold many interests in many JOC's, however, the JOC is a stand alone entity operating in the manner of its multi-firm ownership structure. This latter form of organization has persisted, in my opinion, as a result of the history of management and the development of Information Technologies that were not mature. Langlois notes:
And there are certainly examples of this. But it is also possible that a structure of organization can persist because of “path dependence.” A structure can be self-reinforcing in ways that make it difficult to switch to other structures. For example, the nature of learning within a vertically integrated structure may reinforce integration, since learning about how to make that structure work may be favored over learning about alternative structures. A structure may also persist simply because the environment in which it operates is not rigorous enough to demand change. And organizations can sometimes influence their environments — by soliciting government regulation, for instance — in ways that reduce competitive rigors. p. 58
We are on auto-pilot with respect to how the industry is structured and managed. Use of technology is based on the 1980's version of what a network was, a stand-alone hierarchy. The Internet as a tool has not even begun to impact the myopic structure of an oil and gas firm. With the power and connectivity of the Internet, why are partnerships, which are systemic in the oil and gas industry, not operated as partnerships? Bureaucracies are what brought us to this point, not what will take us to the next level.

From internal to external capabilities: the new economy.

By the 1980s, the large corporation that had looked inevitable and invincible in the 1950s and 1960s had become an organizational structure increasingly misaligned with economic realities — and an organization in the process of redefining itself. As those economies revived and trade began expanding by the 1970s, the easy life was coming to an end. Indeed, by the 80s and 90s, the image of invincibility had been virtually replaced by its opposite. As Mark Roe notes, “the image of the corporation as a sweating and not-always successful competitor has become more vivid” (Roe 1996, p. 106). p. 65
Except in oil and gas. In this next quotation Langlois argues that organizational change is driven by the rewards and potential rewards given to the competitors who make the change. He argues further, that as the rewards increase, the probability of changes increase. Naturally I agree with that statement, however, with the substantial increase in oil and gas commodity prices it would be reasonable to assume the increased motivation to change would be true. I think that the rewards of inaction have been greater for management. Higher profits due to commodity price increases have masked the true state of affairs in oil and gas. In essence management have used pricing as the evidence of their superior management skills, when in reality, they have provided zero or even negative value generation. As time passes and the overall deliverability of the firms production declines, we will know the effect of management.
Ruttan and Hayami (1984) have proposed a theory of institutional change that is relevant to my story of organizational-and-institutional change. As they see it, changes in relative scarcities, typically driven by changes in technology, create a demand for institutional change by dangling new sources of economic rent before the eyes of potential institutional innovators. Whether change occurs will depend on whether those in a position to generate it — or to block it — can be suitably persuaded. Since persuasion typically involves the direct or indirect sharing of the available rents, the probability of change increases as the rents increase. And the more an institutional or organization system becomes misaligned with economic realities, the more the rents of realignment increase. My argument is that these changes in technology and markets opened up attractive rent-seeking possibilities that could be seized only by breaking down or “unbundling” the vertical structure of the managerial corporation. p. 66
In addition to the lack of development in organizational structures in oil and gas. The oil and gas companies management have focused their efforts on field level innovations. Instead of sponsoring and supporting the next innovative Packers Plus or People, Ideas & Objects they vilify them for their forethought. Having secured 100% of the proceeds of oil and gas sales permits them to control all aspects of the development of the industry. Instead of focusing on the key value generating competitive advantages of the firm, their earth science and engineering capabilities, they involve themselves in a process of divine selection of which friends of theirs will receive the benefits of their budgets. As time passed and the cycle of feast or famine continued in shorter and shorter cycles, the service industries continued to atrophy due to a lack of financial resources or people willing to work in oil and gas. The results of this "management" are in plain sight in the Gulf of Mexico. Everyone is at fault and no one can do anything. Instead, what we need to be doing is something along the lines of what Langlois notes here.
When a modular product is imbedded in a decentralized production network, benefits also appear on the supply side (Langlois and Robertson 1992). For one thing, a modular system opens the technology up to a much wider set of capabilities. Rather than being limited to the internal capabilities of even the most capable Chandlerian corporation, a modular system can benefit from the external capabilities of the entire economy. External capabilities are an important aspect of the “extent of the market,” which encompasses not only the number of possible traders but also the cumulative skill, experience, and technology available to participants in the market. Moreover, because it can generate economies of substitution (Garud and Kumaraswamy 1995) or external economies of scope (Langlois and Robertson 1995), a modular system is not limited by the weakest link in the chain of corporate capabilities but can avail itself of the best modules the wider market has to offer. Moreover, an open modular system can spur innovation, since, in allowing many more entry points for new ideas, it can create what Nelson and Winter (1977) call rapid trial-and-error learning. From the perspective of the present argument, however, the crucial supply side benefit of a modular production network is that it provides an additional mechanism of buffering. p. 70
What I see in oil and gas is not the dynamic and innovative industry that it should be. I see the scope of the problems facing the industry escalating exponentially, and the capacity to deal with the day-to-day operations fading. A desperate situation that is made worse by a management that ceased to be effective decades ago. As hard as I have tried to secure funding for these developments, the past seven years have been frightening and shocking. We are quickly coming to a point where the ability of the industry to increase or even maintain its production deliverability is irretrievably lost. I can certainly say that I have done everything that I could to make this situation right.

We have two choices in how we approach the future deliverability of the oil and gas industry. We can continue to throw money at the situation, as BP is doing. Or we can re-organize ourselves to approach the problem in a different fashion. I think the challenges that we face are significant and there is no more important commodity then oil and gas is to society. I vote we re-organize.

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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