Showing posts with label People. Show all posts
Showing posts with label People. Show all posts

Wednesday, October 08, 2014

Thinkers and Doers

We'll be starting this week off with a discussion of who generally we are looking for to populate the user community. What types of people are needed to make the user community function to provide for the most dynamic, innovative and profitable means of oil and gas operations.

The world is divided by two different types of people. There are “thinkers” and there are “doers.” Lately thinkers haven’t been appreciated too much, I know I'm one of them. The problem with the oil and gas industry is that they have only rewarded doers for their actions. Thinkers have been shunned and discouraged at every opportunity. As a result little if any “thinking” gets done in the industry and the thinkers have had to transform themselves into doers in order to keep themselves employed. This is a bad situation from the long term perspective of the industry. No one is looking after the store. This turns out to be a good situation for me as it has left a rather large hole for me in which to work.

The proportion of thinkers to doers in society is very small. Nonetheless their effect is tangible. What the user community needs to do is to recruit a disproportionate number of thinkers within the community in order for it to do its job effectively. Therefore if you fall within the category of a thinker, and have been frustrated by the inability to use those talents the user community is the place where you should be. There you will find the kind of environment where the work will challenge these talents on a consistent basis.

For example, assume that you were working on the Material Balance Report. What you would do is start with the understanding that nothing existed in the marketplace and you had to build something to deal with the needs of the producers. You would need to determine what those needs were today. And think what those needs might be in the future. And also think what those needs “could be” if we provided additional information or capabilities. You would then have to design the various processes and subprocesses, thinking through all that exists within the industry in terms of a Material Balance Report. And engineer the kind of solution that is possible for the dynamic, innovative and profitable oil and gas industry.

The enormity of this task would be a team effort, for that there is no doubt. The Material Balance Report would take hundreds of man years of user community and software developer time. It would be the first time that such an undertaking would be accomplished. This is beyond the scope of what one producer firm can do. And since we are aggregating the resources of the industry we can apply ourselves to the time and effort necessary to really solve this difficult and poorly served area of oil and gas administration and accounting. And in saying that I realize that I've probably unnecessarily limited the Material Balance Report to those domains. And maybe it should include the engineering and production concerns as well?

We all know what the problem is in terms of the Material Balance Report. What is the solution. I’m sure there are a few with their hands up now. It is the thinkers who can help lead the way through the difficult process of finding the answer to these questions. Some thinkers and a lot of doers. I know they're out there, I've met a lot of them. And I know what they like to do. And I know that what I am talking about here is the kind of work that keeps them moving forward.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.

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, December 06, 2009

More on the Preliminary Specification

The Draft Specification provides the overall vision of how these systems will be built and operate in the oil and gas industry. The Preliminary Specification uses the overall vision of the Draft Specification and puts much of the greater needs or details of each individual job in the oil and gas industry. Answering many of the what and how questions of the things that need to be done. This is a very large group of people that together hold the full scope of understanding of the industry. I am of the belief the Preliminary Specification will require several hundred people to develop a strong skeleton of the systems needs.

It is also this large group of people that will become the core of the Community of Independent Service Providers offerings. Providing leadership for both the Preliminary Specification and forming the core service offerings to support the producers in the future.

The role of the producers is critical at this point. Critical from the point of their specific needs. Participation helps to make the solution appropriate for their needs not only from a process and functionality point of view. But also getting involved at the beginning will help them form the service process relationships and fully integrate their firm's needs in the software. This is one of the critical areas of the quality that will eventually be reflected by this community and its software offering. Why the oil and gas companies continue to belittle the process and withhold their participation is beyond me. That however, is their problem as we can do this without the producers active involvement. They are critical for their individual needs, not the systems development.

Although I have detailed some of the technologies that are being used in this project. These technologies are not critical to the Preliminary Specification. In fact I want to eliminate any and all discussion of technology. It's not important and would be an impediment to the creative process that we are involved in. Using the Joint Operating Committee as the key organizational construct requires this blank slate approach. It has been the basis of how this design started, and as a result, will remain the key value of how this community provides the long term value to their client producers.

The deliverables from the Preliminary Specification will have a defined project scope. As a result, in subsequent phases of development we should not have any scope creep. Another key deliverable will be the development of the stories that communicate the systems needs to the developers. The last deliverable that I want to mention today will be how the CISP are able to take this design and integrate the software, through their service operation.

This sounds fairly ambitious, particularly from the point of view of the numbers of people. I would point out in my defense the name People, Ideas & Objects considers this. Also I would point out the spread of ideas to date. The Draft Specification has had over 1,500 people read Part I, and over 700 people read Part II. Think about that from the point of view of people having to spend a few hours reading this. If we draw a few hundred people out of this community, that have been reading and thinking about this system design, thinking about their involvement, bringing their ideas, and thinking how they can build a service offering to provide the producers with the most profitable means of oil and gas operation...

People are driving these changes, and their doing it from a business point of view. Trust me when I say that the developers will be able to accommodate any design that comes out of the Preliminary Specification. I guarantee it, therefore focusing on technology is a distraction. For the past 40 years it has been the technology that has driven the focus of oil and gas systems. The technologies and the compliance frameworks have made the oil and gas company about as foreign to the JOC as is possible to conceive. We are moving the focus away from technology to focus on the most profitable means of oil and gas operations.

In a world where the oil and gas producer will need to make more decisions based on ideas derived from the earth sciences and engineering basis of the business. A world where decisions are based on the legal and financial foundations of the participants of a JOC. The Community of Independent Service Providers and Users will capture this in the Preliminary Specification. Creating a system and organization that are representative of the underlying meeting of the minds of the producers involved. Please join me here.

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Friday, October 09, 2009

Pushing the Envelope

A lot of change is considered in the Draft Specification. Much of it difficult to assume is correct. What has been researched, and is represented in this blogs 700,000+ words, hangs together in its entirety. In other words it works on paper.

It can be frightening to view the Draft Specification and its impact in oil and gas. I know that people are ready and willing to change. The demand for change being driven by the difficulties in the economy. The escalating oil and gas prices and the financial crisis provides the realization that the old ways need to be looked at. People are looking at this point in time; from the point of view that the old ways are not providing the value we need.

How the future unfolds will not be by happen stance, in my opinion. In other industries some products are assembled in many different countries. They have components and parts that contact dozens of different countries. Organization is more by design then by chance. If, as I believe is happening, the large bureaucracies are unable to continue building value, their difficulties and decline will soon become obvious. That being so, what replaces the ways and means of the oil and gas industry from an organizational point of view.

The point I'm trying to make is that the ways and means of the oil and gas industry will not happen on their own. We need to take what proven ideas we have and start building them to ensure the transition from the old ways, the bureaucracies, is not interrupted to the new, the Draft Specification.

Looking at this problem another way, Exxon Mobil employs hundreds of thousands of people around the world. What do these people do, where do they do it and how do they do their jobs? In many ways we have lost the ability to know what our organizations do. And, if they are failing what does that mean. Can the world afford a decline in energy output? Or do we have an obligation to do something to ensure that there is a transition.

If the bureaucracies have taken the division of labor and specialization to the point where Exxon Mobil employs hundreds of thousands. What will the future need in terms of the division of labor of future organizations. To grow 90 million barrels of oil per day requires innovative, faster organizations. We think we know we can't get their with our current organizations, but we can certainly go backwards into what I will leave to your own imaginations. The choices we make today are therefore critical in making our future.

How this is done is through the people that are a critical part of this industry. Their ideas to make it better and the objects that make up the People, Ideas & Objects software. Please join me here.

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Monday, November 24, 2008

Two groups who need People, Ideas & Objects.

AP is reporting that the large and small producers in the oil and gas industry are experiencing some systemic difficulties. The large producers are able to generate large cash flow, and indeed have large bank balances. However, recent declining and negative reserve trends are now causing their production to decline. These accelerating decline curves are a direct reflection on their ability to find and produce more oil and gas.

On the other end of the spectrum the small producer is challenged by the inability to generate or raise any cash to begin to address their growing needs. This of course is as a result of their small asset base and the current low oil and gas prices. On the positive side, reserves are able to be increased at will. The reverse of the situation of the larger strata of the industry. To me this is not news, but a reflection on the way things have operated in the industry for many decades. The scope and severity of the problem comes down to the large producers declining production profiles.

Another issue that the entire industry faces in the short term is the size of the asset write downs caused by the today's lower prices. Based on the prices of the commodities it is fair to assume that producers were able to capitalize 100% of their costs associated with exploration and production since 2004. These costs are now subject to the auditors testing of value, based on the reserves. Potentially we may see the industry reflect large losses on their write downs to fair value.

Over the past 20 years the small producer has struggled to keep the doors open. Just as many small enterprises in other industries experience. Testing the risk profiles of small producers would result in the conclusion they are at stratospheric levels. Leading to the skill and courage of the investors and management, just to survive. Small producers have the inability to provide any returns for their investors for many years. The simple act of building a producer has to consider the many millions of dollars needed to increase the production profile. Many of these millions go to the simple act of keeping the lights on. The overhead of the firms is notorious for getting in the way of the investors expectation of receiving some value from the firm. Granted their will always be the capital gains that the investor could make over the life of building the firm. But their capital gains are not that spectacular and they should expect and receive more of the value they provide.

I have always marveled at the discussions that are made around the companies reserve reports. Reports on the field activities that have no concept or consideration that those operations have to support the administrative and management of the firm. In a public company this discussion takes on a much larger concern as the overhead costs of a public firm push the administrative costs well beyond what is possible for the management of the firm from an engineering and earth science point of view. The Private Equity movement that began in the last decade is symptomatic of the huge compliance and governance costs that a small public producer has to offset before there is anything left for anyone else. Please review the Compliance & Governance module of the Draft Specification for further information in how the compliance and governance is handled.

How is it that People, Ideas & Objects can help in this area? From the perspective of a large producer I see the problem as an issue of focus. The firm needs to simplify their strategy to something that will make money for the shareholders. This blanket strategy may not be appropriate for all of the properties or Joint Operating Committee's (JOC's) they have an interest in. (I attribute this as the source of the firms lack of "focus.") To say that there is conflicting strategies of the producers representing the JOC is obvious, and one of the sources of how problems get resolved is through identifying and resolving these contradictions and conflicts.

One of the advantages of moving to the People, Ideas & Objects system is that the JOC is able to set the strategy irrespective of the individual producers "global" strategy. Enabling each and every JOC to be optimized for their best operating and performance strategies and tactics. Providing the much needed focus that the large producers can not find. This strategy optimization in the JOC is a direct benefit of aligning the legal, financial, operational decision making, cultural and communication frameworks with each of the producers compliance and governance frameworks.

The banks, investors and money markets may have an interest in the producer or the JOC itself. Securitization of the individual interests in oil and gas will be necessary to fully optimize the innovative stance and increasing reserves of the industry.

Therefore the mix of producers in the JOC will help to mitigate the producers size issues for the entire industry. The large producer can partner with the smaller producers to balance out the needs of the property. Recall that the Partnership Accounting module in the People, Ideas & Objects system is based on the contributions of the individual firms represented. If a firm has a specialty in a certain regional geography, it can then agree with the partnership that the costs of those specialties goes towards satisfying some of the commitment from the company to secure their interest. In other words. The small and large producers are able to earn their interest in the property through their contribution of capital, expertise and / or land position on an all in valuation basis. If a geologist were to prove their value in the marketplace by finding commercial volumes of reserves. Then their ability to secure elements of the interests in the producing assets he / she is directly involved in creating.

The last point of the previous paragraph violates the first order of all oil and gas managements oath of allegiance. (I'm trying to be funny.)  Recognizing Intellectual Property (IP) is the exact opposite of the situation that exists in the energy industry today. Particularly the large firms do not want anyone to hold any form of IP as it conflicts with their needs to find people to employ and is (incorrectly) believed to be a leakage of value from their organization.

This is the 21st Century. We have the manner of all economics being re-aligned on the basis of new and more effective organizational structures. Those that believe in the bureaucracy, of any industry, are effectively being cut down to nothing in this market. The current economic climate is the same situation that affected the Former Soviet Union in 1989. The methods of organization could no longer sustain the demands of the people and failure was the result. Our system of organization has reached its limits of growth based on the bureaucracies inefficient efficiencies.

So the sooner we say good bye and good riddance, the sooner we can achieve the multiples of our current standard of living. As Jonathon Schwartz at Sun Microsystems says, you have to stop to change direction. These points are addressed in the Resource Marketplace and Research & Capabilities modules. If we expect to deny people the rights they earn in thinking through the big problems of how we can solve the oil and gas industries problems, then we are eliminating ourselves from the entire economic equation of the future. Our choice, and those that don't want the People to hold the trademarks, patents and copyrights should research which way is the best for the oil and gas industry to continue. We're going this way.

This issue is also addressed in the People, Ideas & Objects system. The competitive advantage of a producer is their physical producing assets, land base and scientific and engineering capabilities and capacities. Ownership of the capabilities and capacities, (the current situation) I don't think provides the industry with the value they think they attain. Building huge, mutually exclusive capabilities in each and every producer has increased the level of redundancy in the industry to a ridiculous level. Note also the large producers effectiveness of using these capabilities and capacities in finding and producing oil and gas. People, Ideas & Objects is the better way.

The producer who researches, develops and manufacturers their own drill bits is at a distinct disadvantage to the other producers who have manufacturers providing drill bits based on a collective need across all producers. I don't see too much difference in this example from what a firm is doing today with their geological talent. The alternative is hiring from a pool of highly qualified and talented scientists for application to a specific issue in one JOC. This has advantages that are directly beneficial to the future oil and gas producer. Once the geologist has completed their work, there may be no more work from that JOC in that area for his specialty again. He will have to keep thinking of how better to get the oil or gas out of the ground, (his job) which will form the basis of his new, and far more valuable to him, IP. Why employ him for 35 years and promise a retirement benefit that Wall Street will only take away from him.

The most effective change that the People, Ideas & Objects system provides the industry is an alignment to the cultural basis of the business. The JOC is the business, and the business is the JOC. Recognizing these facts in the IT that identifies and supports the JOC is a necessary realignment of the industries interests. A realignment that will fuel the innovation and further development of the critical sciences that are underlying the business of oil and gas.

With respect to the large and small producers that I started in this post. The alignment removes the conflict that the industry has with the development and ownership of Intellectual Property. It enables the large producer to use their cash flow in a manner that is more consistent with the needs of their JOC's producing properties. And the small producer has the ability to sell more of the talent and capability that is a necessary part of the industry makeup to financiers and investors. Both sides appear to me to be winners.

From the investor point of view, the fact that the systems will be supported through the levying of a fee on the basis of $ / BOE / year means that the larger producers will be paying the largest part of the freight in terms of the People, Ideas & Objects software development costs. Producers that are small and have no production would be use the system for free and have the Community of Independent Service Providers, that are a key part of the People, Ideas & Objects community, available to help mitigate the large associated costs of running a start up oil and gas concern. Please see the Compliance & Governance module for further clarification of how this is implemented in the system. And recall, that ideally the investor is the one representing the ownership interest of his / her share at the virtual JOC table.

Now is the time for these ways and means of operating be adopted. What we are witnessing is economic history. Producers MUST become more efficient and begin the process of rebuilding the industry from a more efficient and effective means of organization. To say the industry is collapsing is best reflected in Canadian Natural Resources Ltd impending demise. Please join me here.

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Sunday, July 06, 2008

People's value proposition.

In last weeks entry I noted three items that were causing our software development budget to increase substantially. They are;

  • Paying the user.
  • Undertaking a global scope.
  • Employing a 36 hour work day.
This entry will note why these costs are not as onerous as they would be under past software development methodologies. And in turn defining our business model's value proposition.

I am critical of the software development methods used in the past. The SAP and Oracle model have proven successful for their companies, but recall they are applications from prior technology era's. And no one would suggest that the model of "build it and they will come" is relevant today. The two major constraints of an innovative software developer are the code of the application, and the customers that use it. Users that are looking at new and innovative ways of deploying either SAP or Oracle are met with a bureaucratic process that makes changing organizations a much easier task. Upgrading the software comes with high costs and many promises that do little but entrench the vendor further in your organization.

If SAP and Oracle were to spend the required budget to build this People, Ideas & Objects type of application, the producers would end up paying for this code several times over. There has to be a better way.

Why doesn't the oil and gas industry as a whole pay for the ERP system code just once. Why not share the costs of development over the entire industry on the basis of costs plus a percentage for the developer. A developer on this basis would only interest themselves in what makes the software better. And that is the ability to interpret the users demands and build the software they want. If the user wants to scrap a module and replace it with two new ones, based on this proposed business model the developer would be most pleased with that.

This is how I have proposed the People, Ideas & Objects application from the very beginning. An industry wide software development capability, designed and defined by its users, supported by distributing the costs of development across the global producer population. Has their been a software developer that has used this model today? I think Google does it this way and therefore this comparison imputes the development will never stop. The innovative process is iterative and it never stops, why does software development?

It is my opinion that using the Joint Operating Committee in the manner that is defined in the draft module specifications provides me with the competitive advantages that I need to build this software development capability. This advantage is not open to any other software development firm as I have the rights to the ideas secured. This IP based competitive advantage is necessary to ensure that a series of competitive look-a-likes to this development don't dilute the focus to get this right.

In summary this is the value proposition of this software development project.
  • Establish an innovative footing for the oil and gas producer.
    • Eliminate the constraints of code and customers.
    • A "software development capability" based competitive advantage.
    • User driven and focused developments.
      • Determining and interpreting User needs.
  • Charge the oil and gas industry on a software development cost-plus basis.
  • Focus the industries actions through management of Intellectual Property.

Join me here.

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Sunday, April 13, 2008

Draft Specification - Resource Marketplace Module

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

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

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

A summary list of the published modules.

Draft Specification - Security & Access Control Module

Draft Specification - Petroleum Lease Marketplace Module

Draft Specification - Partnership Accounting Module

Draft Specification - Accounting Voucher Module

Draft Specification - Resource Marketplace Module.

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

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

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

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    Thursday, February 14, 2008

    Yesterday's thinking.

    Cambridge Energy Research Associates (CERA) are having their annual conference in Texas this week. The CERA / IHS line that a tidal wave of petroleum is about to hit the consumer continues without much basis in fact or reality. Its been too many years of this monotonic claim of theirs to consider the message as valid.

    Irrespective of CERA's message, there are those that suggest more spending is needed. I think more spending has been tried by Chevron and others, and also proven invalid. Doing more and more is rarely the right choice. Change is certainly in the air, it is important to note this point in time is an opportunity for new thinking and actions to take place.

    As Einstein stated, today's problems are not solved by today's thinking. I think it is reasonable to assume that the earth sciences and engineering disciplines have increased in complexity. As the bar is raised substantially for successful oil and gas exploration and production. Eventually the structured hierarchy, which is inefficiently efficient, will prove to be inadequate to meet the needs of the science and the industry. What is needed is new forms of organization where the science can develop within the organizations, and be used effectively to produce more oil and gas. This challenge has been the key issue that has driven the writings in this blog. The research to determine if the Joint Operating Committee can fulfill this role is proven, at least academically.

    The management, and most importantly the system's like SAP and Oracle, have been developed in the old "banking" type thinking of the energy industry. Invest a dollar today, and you'll receive a 10% return on almost a guaranteed basis. This thinking is a product of the excessively low oil and gas prices of the 1980's and 1990's. The business today is more science oriented then the banking orientation can comprehend. The systems that were developed in the past are designed to accommodate the governance and compliance of the SEC, Tax and Royalty regimes. Neither SAP or Oracle recognize the existence of the Joint Operating Committee. Yet the JOC is the legal, financial, organizational decision making and cultural way of the business on a global basis. If we moved the compliance and governance of the bureaucracy to the the four frameworks of the JOC this science and innovation mindset of the industry will be accommodated.

    But there are more benefits to be had. With the systems that are available in today's marketplace. And the current population of oil and gas workers. We can organize in ways that have been proven time and again to increase productivity. Adam Smith's Division of Labor is based on his re-organization of a pin making shop. Smith's reorganization of the pin factory rendered 240 times the volume of pin production. Division of labor is also known as the primary method of how economies grow. Further division of labor holds the greatest opportunity for the industry to deal with the age and retirement of the workforce.

    The times that we now live in are too complex to move to a new organization without the proper preparations being made. Key to those preparations are the software developments that are built to accommodate these changes. Change must first be implemented in the software, or any unprepared change will be relegated to manual systems. I am in the process of publishing the eleven draft module specifications of the People, Ideas & Objects application. This application is under development here to incorporate these ideas and opportunities.

    Ludwig von Mises noted the industrial revolution was the solution to the problem of over-population. We are faced with these same problems today, and I would suggest the Information Technology Revolution will only begin when it is deemed to be the solution to the problem of over-population. For oil and gas, please join me here.

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    Thursday, January 17, 2008

    President Bush in Saudi Arabia

    The President's trip to the Middle East gave him the opportunity to ask the Saudi King if he would consider increasing their oil production. The Presidents response was honest and candid and reflected the seriousness of the times that we now find ourselves in. In an exclusive ABC News interview he stated;

    "If they don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do."
    In a related story an official of BP Energy was quoted as saying that oil demand would peak before supply. If that is what passes for intelligent discussion at BP. The world is in much more dire of a situation than I thought. BP should be absolutely ashamed of itself.

    Anyone, in my opinion, with 10 or more years of oil and gas experience will know intuitively the peak oil situation. Companies like BP appear to choose to lie about it. When this problem becomes "real" and the world in turn asks you what you did about it, you can turn and say you helped to build the systems solution that is documented in this blog. Join me here.

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    Thursday, January 03, 2008

    A test of Hayek's theory of spontaneous order.

    I have referenced Professor Russell Roberts on this blog before. He is an economics Professor at George Mason University, and a Fellow at Stanford's Hoover Institute. His best work is available freely through his blog Cafe Hayek, and podcast EconTalk. I highly recommend subscribing to both feeds.

    One of the concepts that Hayek developed was "Spontaneous Order". In the last month this blog has morphed from somewhat of an academic exercise of extending the thinking of my thesis, to a project that is actively searching for funds, Users and Developers. Over the past year the number of people who subscribed to this blog grew slowly into a handsome audience.

    Since I published the call for action in December, it is clear this community was waiting for me to exercise this change. That I may have been limiting the response is obvious to me now. The numbers of people who share an interest in these writings continues to increase. And I can now see that Hayek's concept of spontaneous order is possible. Professor Roberts provides clarity on the interaction of "spontaneous order."
    When we talk about spontaneous order, the adjective is trying to capture the fact that no one is in charge, controlling the economic system - the order we see around us is spontaneous, organic, emergent, rather than controlled, directed or managed.
    and
    But I've been thinking lately about a different sense of the word spontaneous. It's the ability of the modern economy to deal with our spontaneity as economic actors, or, it's how order re-emerges in the face of our spontaneity as economic actors.
    and
    What happens when there's an unanticipated, essentially spontaneous change of behavior?
    What should spontaneous order mean to Users and Developers? Action! Action not only in proceeding with the development of this software, but also learning what could be done. Action on behalf of the producers to sponsor this development, action on behalf of the Developers to get involved and action for the User groups to form and move forward.

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    Monday, December 03, 2007

    McKinsey on the Worlds New Financial Power Brokers

    Authored by Diana Farrell, a director of the McKinsey Global Institute and Susan Lund, a McKinsey consultant. I have read many articles of Ms Farrell's and included a review of her October 2003 Harvard Business Review article in my original thesis. I find her articles to be on topic and earth shattering in their accuracy and scope. This article does not disappoint either. The global "money" business is changing rather rapidly. As witnessed by the anticipated losses in the U.S. housing industry, the financial resources that are available globally are jaw dropping. With the kind of money being discussed in this article, globalization faces a very bright future. (Click on the title of this entry for the McKinsey article, free subscription required.)

    If as I had suggested here, the global oil and gas industries financial needs were pegged at $32 Trillion, this seems more then possible and well within the realm of reality based on the size of the global financial markets. This then begs the question, how best should the energy industry organize for this future? Should we stay with the structured hierarchy and its close cousin the bureaucracy? I think I'm going to continue looking for like minded people that want to joint me here.

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    Thursday, November 08, 2007

    The McKinsey Quarterly, Harnessing the power of informal employee networks.

    McKinsey has published a new article about the power of networks under their "Strategic Organization" functional group. Recall Metcalfe's law states the power, or value, of a telecommunication's network is proportional to the square of the number of users of the system. Although I don't think that the McKinsey authors were thinking in terms of Metcalfe's law, I think it is relevant. The pertinence of the law applies to the number of people as much as it does to Ethernet connections. In this article McKinsey states that informal networks are flourishing in corporate America. This is an extension of "human nature, including mutual self-interest, leads people to share ideas and work together even when no one requires them to do so." Music to my ears and something that I suspected would begin to happen to corporations.

    Although this article addresses only internal networks, in oil and gas particularly, these informal networks affect the communications between companies. Recall the discussion about the stickiness of information and how information flowed through a hierarchy much slower then through the industry itself. These are the informal networks that have been existence for as long as people were employed in corporations, what's different now is they are much larger in terms of participation and volume. The Information Technologies are making these networks the most effective way in which to get things done. I see this as the failure of the hierarchy and its second cousin the bureaucracy. The path of least resistance is going to be used by people whenever there is pressure to perform. And as McKinsey notes about companies, and particularly large companies, there are tangible benefits.

    Most large corporations have dozens if not hundreds of informal networks, which go by the name of peer groups, communities of practice, or functional councils -- or have no title at all. These networks organize and reorganize themselves and extend their reach via cell phones, Blackberries, community Web sites, and other accessories of the digital age. As networks widen and deepen, they can mobilize talent and knowledge across the enterprise. They also help to explain why some intangible - rich companies, such as ExxonMobil and GE, have increased in scale and scope and boast superior performance.
    I can assure my readers that the ideas expressed in this blog have been resisted by the corporations. The corporations are unwilling to address these points and have systemically refused to sponsor or develop any of these initiatives. Just outside of their purview is the growing network of readers to this blog that see the long term solutions to their problems, and the network continues to grow. Sadly the bureaucracies will not participate until it is too late.
    So it's unfortunate, at a time when the ability to create value increasingly depends on the ideas and intangibles of talented workers, that corporate leaders don't do far more to harness the power of informal networks. Valuable as they are, these ad-hoc communities clearly have shortcomings: they can increase complexity and confusion, and since they typically fly under management's radar, they elude control.
    And in oil and gas it doesn't need to be this way. Companies are a critical part of the community that is being built here. The ability to manage your business can be enhanced by getting behind these informal networks and enabling them with software such as I am discussing in this blog. By doing so, they would be able to harness the power of these networks and eliminate the down side risks associated with them. Downside risks that are detrimental to the firm and increasing in terms of scope and scale.

    To me the most disappointing aspect of reading this article is that the Joint Operating Committee is the cultural way of the industry. Its inherent in everything that it does and yet, for purposes of the hierarchy and its compliance focused ERP system vendor, most and if not all aspects are ignored. Which leads to me to re-iterate the proposed Military Command and Control that is fundamental part of the Compliance and Governance module. In terms of organizational structures the hierarchy has had a good run for the past 100 years. However its time is up. One organizational structure that has been successful for many thousands of years and one that is proven to be successful at least 50% of the time (counting both winners and losers) is the Military Command structure. Why not use the Military Command and Control structure for these informal networks?

    So there we have it, the people within organizations seek to form informal networks as the path of least resistance. And oil and gas assets are best managed through Joint Operating Committees. For the first time I think I begin to understand why management dis-likes the ideas I write about.

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    Friday, November 02, 2007

    And so it continues.

    Total Petroleum is in the news again regarding the probabilities the world might be able to produce 100m b/d. Recall I wrote about Total's revision to its future production increases were down 20% to 4%. And how that 1% increase was miraculously beyond the reach of what the company could attain. Today the CEO Christophe de Margerie was commenting on the International Energy Agency's report that expects 103m b/d in 2030. De Margerie states the possibility is an;

    ...“optimistic” scenario - meaning output was unlikely to reach that level. By implication the IEA’s ‘reference’ or business-as-usual scenario, in which output is forecast to soar to 116 mb/d in 2030, is even more far-fetched.
    As CEO of one of the largest oil producers this is refreshing and candid honesty. The CEO goes on further to describe why he believes the world will not attain those production levels.
    ...that oil production was unlikely ever to reach that level not because of policy intervention, but due to a combination of geopolitics and geology.
    and
    De Margerie said that the quality of oilfields now being exploited was worsening, and that this would restrict the rate at which oil could be produced. “Definitely we have been - all of us - too optimistic about the geology, not in terms of reserves, but in terms of how to develop those reserves, how much time it takes, how much realistically do you need.” There had also been a false assumption that North Sea-style recovery factors could be achieved everywhere, said de Margerie: “Not true; it doesn’t work”.
    and
    Then came his own Rumsfeldian flourish: “But the fact that you don’t have the answer gives you the answer – ie. 100 [mb/d] is difficult because in the 100 you have already additional production in Iraq, you have additional production in Venezuela, you have additional production in Nigeria, you have additional production everywhere, and today we know those developments are not under way.”
    An explicit and clear set of comments that reflect on the dire nature of the energy situation. The honesty is welcomed and is joined this week with two other notable comments. Sadad al Huseini, former head of exploration and production at Saudi Aramco says that up to 300 billion barrels of oil reserves of the worlds remaining 1,200 billion barrels is not there. Something that Matthew Simmons has been saying for many years, and Daniel Yergin has flatly denied on many occasions.

    Lastly in an interview with James Smith, Chairman of Shell UK on Sky News. Smith made a statement that shows the way in which the energy problem may be solved.
    In answering the question of activities in oil and gas being more expensive from Jeff Randall, James Smith says "so technology, partnerships and a resiliant balance sheet are going to be very important for the future"
    Those that are interested are welcome to review this blogs archives and see how I think technology and partnerships (The Joint Operating Committee) can be employed innovatively in oil and gas.

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    Thursday, November 01, 2007

    Ralph Raico, The Life and Work of Ludwig von Mises.

    Mises Video Podcast series. Ralph Raico on video in a 07/31/2005 Lecture at the von Mises Institute.

    Professor Ludwig von Mises is more famous for his student Professor Frederick von Hayek then for his own ideas. Mises controversial ideas forced him to lead a low profile, with a decided lack of academic support for those ideas. Mises is considered one element of the foundation of what is known as the Austrian Economics, which includes Professor Joseph Schumpeter and Hayek. As is noted in the video Hayek was the more temperamental, much more moderate, in expression to Mises more outspoken ways. Being of the Libertarian mindset his views and thinking were generally not very welcome in the cozy, left leaning academic world. In his later years he was able to secure a non-paid position with New York University. To say the least Mises was underrated and misunderstood to a large extent. His thinking may best be compared to Ayn Rand's objectivism, and I have heard on many occasions that Mises was deliberately passed over for the Nobel Prize in economics. And it was not until Mises death in 1973 that Hayek was even considered for the Nobel, of which he was ultimately granted in 1974.

    Today Ludwig von Mises ideas are receiving the respect and understanding his work deserved. As Hayek's ideas became mainstream in the 1980's and the foundation of most economics today, the influence of Mises and his ideas are receiving a more objective focus. At around 20:00 minutes into the presentation, Raico states;

    Back in the early 1700's there were slums, people were poor, people died, every possible plague. Mises says you cannot understand the industrial revolution without understanding the western world was undergoing an un-precedented population explosion. For example, England in 1750 had a population of about 6 million; by 1850 the population was 24 million. The question was how would these new tens and tens of millions of people survive? Mises said the industrial revolution was the answer to the population explosion. That's how they survived, by society becoming immensely more productive.
    Or to put in today's terms, the Information Technology revolution needs a problem to solve. Revolutions don't occur on their own, they are driven by the need to resolve some major issue the world faces. I think the problem that needs to be solved today is the continued support of the population, and peak oil. With 6.7 billion people and peak oil being the two constraints to our future prosperity, how will these billions of people survive in a declining energy reality?

    The man on the street has thought that some great technology like dylithium crystals, or hydrogen would provide the answer to these problems. Expecting technology to solve the problem is right, but which technology? Could the "Information Technology revolution" be the answer? What can Information Technology do for the oil and gas industry? Dig through the archives of this blog to find some of the ways in which things could be done more efficiently. To start, think about the masses of people that are getting into their cars at the designated hour and driving to an office, and just how much energy we could be saving. It is the challenges that define the human condition. Just as the world was challenged with population explosion, the solution was automation of labor to increase the quality of life of the larger populations. As we face the large population and peak oil challenges, Information Technology will solve the problems of today.

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    Wednesday, September 05, 2007

    Steve Jobs and his Apple iPod.

    Today was a great day for the Apple faithful with a high profile presentation of the new iPods by Steve Jobs. I want to reiterate the risks of these WiFi enabled hard and ram disk devices in the corporate environment. Pod Slurping is the ability to access and copy corporate information for unauthorized purposes. Now with WiFi the risk rises. A relatively remote risk if you have a secure network, but with all things network, the number of ports and the number of methods is limited by human imagination. These devices, along with the SunSpots and Motes that I recently wrote about, will be perceived by some people as being either curses or highly effective tools. Since I am a glass half full type of thinker, I'll just mention how I use iPods today and what potential they have in the hands of the oil and gas industry that is supported by a capable software development vendor.

    I currently have two iPods that I use constantly. I have used iPods for over four years and find them to be an indispensable tool in this day and age. Firstly I use an iPod Shuffle, the clip on 1GB model that I fill with PodCasts. The iTunes Music Store has many quality podcasts that I subscribe too. Unfortunately I listen to up to 2 - 3 hours of casts each day. The Shuffle allows me to control when and where I can listen to them. I clip it to my lanyard and have the earphones handy. A simple click of the play button and I'm right where I left off. With over 15 hours per charge, I have many PodCasts that I want to concentrate on when I am commuting, waiting, or just out and about. I like to think of this time as an increase in my productivity as I can generally listen and do something mindless at the same time.

    What I have loaded on my Shuffle right now is Bloomburg on the Economy, EconTalk, Google Developer Podcast, The McLaughin Group, Meet the Press, 4 courses of lectures from UC Berkeley (2 economics, 2 information technology), Stanford which includes the Hoover Institute, MIT, Dr. Moira Gunn Tech Nation, NewsHour with Jim Lehrer etc. Jobs stated that there are now 125,000 podcasts, 25,000 video podcasts, so there should be something for everyone. I frequently felt frustrated that I was not keeping up on this valuable content. Now I can synch as frequently as I like and have the most up to date information available to choose from during the day, all thanks to the Shuffle.

    I also have had a classic iPod for over 4 years and find them an indispensable and valuable tool for travel and the like. I also back up all of my data to them, frequently, creating a corporate risk if you lose the device. With the ability to watch movies, television, YouTube or Google videos they can provide an asynchronous portal to the entertainment / information you enjoy or need.

    What will the iPod provide in the near future? I think we have seen enough of these devices development to know that the iPhone will become standard fare for the productive worker. Email may seem like a small increase in capability, however, email with rich media is a completely different tool. People are frequently working with more complex ideas and concepts. Text is the clearest and easiest to produce, but many important concepts can be articulated more clearly in rich media. Speeches, presentations and corporate summaries will be the types of media that can and will be produced. For anyone in the audience of a company that needs to know, the presentation could become central to the quality of its communications. Just as I think blogs will soon replace resumes, companies will need to revisit the definition of their audience and the communications to the people they need to communicate with.

    The Technical Vision that I have presented for this software development project, noted that the volume of data will grow exponentially. I have also noted the need to be tied down into an office is becoming more redundant each day, with possibly energy, or rather the saving of it, may be the killer app for ubiquitous computing, Demanding that people be available anywhere and at anytime they are required. iPhone will be your portal to the control of the demands of daily living and completion of your work.

    Or maybe transaction processing will be the killer application that brings these devices into the corporate world. That is where I am putting my time, money and energy. In bringing this software development to the 21st century oil and gas user and producer.

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    Tuesday, September 04, 2007

    Leading and Creating Collaboration in Decentralized Organizations

    Heather M. Caruso
    Todd Rogers
    Max Bazerman

    Click on the title of this entry to download the .pdf. This Harvard Business School Working Paper provides some insight into the group dynamics of collaboration. I find many of the comments and recommendations are very consistent with my own experiences. These are skills that are necessary in today's marketplace, and I think that the level of collaboration is just beginning to evolve and will become much more complex in the very near future. The authors start out with a chilling example of collaborations failure and looks into the types of group and individual failures.

    In reviewing the Web Services paradigm I sourced a document from John Seely Brown and John Hagel with can be read here. In that article it was discussed how the division of labor caused the dynamic of information leaking out of organizations faster then the information is transfered within the organization.

    In Brown & Duguid (1998) they make the following observations: “The leakiness of knowledge out of and into organizations, however, presents an interesting contrast to internal stickiness. Knowledge often travels more easily between organizations than it does within them. For while the division of labor erects boundaries within firms, it also produces extended communities that lie across the external boundaries of the firms. Moving knowledge among groups with similar practices and overlapping membership can thus sometimes be relatively easy compared to the difficulty in moving it among heterogeneous groups within the firm. Similar practice in a common field can allow ideas to flow. Indeed, it’s often harder to stop ideas spreading then to spread them.” (p. 102)
    We see this phenomenon in oil and gas where news travels very quickly through the industry. If it were an accounting issue it would be openly discussed with the audit firm, the professional associations and within the industry specific organizations such as the Petroleum Accountants Society. Discussions between CFO's of the various producers is very common and many of these conversations are beyond the scope of many of the other C class executives technical understanding.

    The authors note a current example of this "stickiness" and start out with a chilling example of collaborations failure and then look into the types of group and individual failures.
    Many employees note that, in decentralized organizations, it is harder to deal with other divisions or departments of their organization than it is to negotiate with outside suppliers or customers. In ordinary cases, this inter-organizational coordination failure which can cost substantial sums of money. In other cases, these failures can be catastrophic, as different agencies within the U.S. intelligence community (notably, the CIA and FBI) neglected to integrate knowledge of the looming threats that existed prior to September 11th, 2001. p. 2
    and
    Often, instances of coordination failure stem from the failure to appropriately structure the organization around the key inter-dependencies within the organization - whether that suggests organizing by function (e.g., sales, marketing, manufacturing, engineering, etc.), by product group, or by region. Yet, even when organizations are able to design divisions around the appropriate dimensions, there will always be a need to integrate information across the resulting units. We focus this paper on improving information coordination across these organizational units to maximize organizational effectiveness. p. 2
    "The Need for Coordination Across Organizational Boundaries."

    It is at this point that I believe the energy industry breaks from convention. The Joint Operating Committee (JOC) is the legal, financial, cultural and operational decision-making framework of the industry. The software that is used summarily ignores these facts. SAP, Oracle and others do not fully recognize these facts within their domain of functionality and processing. Theirs are focused more on the classic modular breakdown of General Ledger, Accounts Payable and Accounts Recievable with the occassional Land and Production modules designed to handle the company's interest.
    As organizations grow to serve multiple product areas, regions, or demographic groups, they move toward decentralized structure, which enable them to structure the organization around organizational units that match the most important organizational dimension. This system makes it unnecessary for each unit to constantly involve the rest of the company in their local affairs, relying instead on each unit to coordinate their actions with others only when necessary, and to otherwise focus their relatively undivided energies on the niche for which they have been made experts. As a result, these decentralized units demand less monitoring from busy top management teams, expand the organizations capacity to explore and adapt to its environment, and create space for innovative, entrepreneurial problem solving. In addition, it is easier to motivate performance in a decentralized organization than in a tightly controlled centralized structure.
    And possibly the authors are speaking proactively. In that the future dynamics of the organization will move closer toward a market configuration as opposed to the strucutured hiearchy. It would certainly appear in this next quotation that is the mindset of the authors.
    Nevertheless the world is getting smaller. The various pockets of human society are becoming more dynamic and diverse because they are coming closer together, connected by an increasingly dense web of physical and technological expressways. With these connections, synchronized patterns and coordinated activities are likely to emerge across multiple locales, though they may be exceedingly complex, often anticipate, identify and respond to patterns of activity across the diverse niches their subdivision serve. p. 3
    Which is all well and good but as we all have experienced in life, there are consequences of these things. And this is where collaboration can really cause disruption in the day to day functioning of inter-organizational communications. How can each and every producer within a JOC deal with the group dynamics of the property. I would suggest that ignoring the JOC for the majority of the time has been the bureaucracies and software vendors' means of dealing with these group dynamics. The problem with this position is that the tools necessary to have a more direct involvement are influencing the industry and the performance metrics of the JOC may (will?) provide real competitive advantages to those producers that embrace this new dynamic.
    Unfortunately, the rapid and novel changes that create the demand for decentralization in the first place often place organization leaders in a considerably less certain, and consequently less commanding, position. p. 3
    And here must be classified as another call to action;
    Leaders cannot afford to possibly wait for these unstructured collaborations to emerge on their own. Boundaries and bad habits make organization members unlikely to instinctively reach across divisional lines to integrate their knowledge and activities appropriately. p. 4
    "Barriers to Information Sharing across Organization Boundaries"

    "Intergroup Bias"

    There may be over 100,000 JOC's in the global oil and gas industry. Each one is distinct and has elements that make each one mutually exclusive to the others. Different partners, wells, facilities and location are just some of the attributes that make them unique. The authors suggest that this may impede collaboration between the companies associated with a JOC.
    One key barrier to cross-boundary information sharing stems from one of the very reasons organizations establish group boundaries to begin with: to create and maintain a recognizable and meaningful distinction between two or more groups in the organization. p. 5
    With the assocated size of many JOC's it is possible to have hundreds and possible several thousand people employed exclusively in one JOC. Therefore for each company to dedicate staff to that one area would not lead to too much difficulty. However, the firm has needs that are associated with that JOC that are above and beyond those individuals focus. Much as I have written about the possible difficulties experienced by Chrysler. Where the firm may lose some of its overall technical capability by the focus being exclusively on the JOC and the market that supports it. The firm needs to conduct elements of science and technology capabiliities which in addition to its land base are its key competitive advantages. Here the authors indirectly note the problem that I think is highly related to the Chrysler situation that I wrote about here.
    In a decentralized organization, the salience of differing groups memberships and this self serving motivation set the stage for integroup bias - the systematic tendency to unfairly treat one's own group or its members better than a non-membership group or its members. p. 5
    and
    Competitive pressures on the different groups in a decentralized organization could easily provoke similar forms of intergroup antagonism and diminish or destroy any hope of unstructured, emergent collaboration. Company funding, access to markets, intellectual property rights, and numerous other organizational assets are all potentially scarce resources over which groups with the organization may have to (or feel they have to) compete. p. 6
    and
    This suggests that the fog created by legitimate competition between organizational groups can prevent group members from recognizing or taking advantage of unrelated opportunities to share mutually beneficial information and collaborate. If derogation of the out-group extends to derogation of the information it possesses, members of one group might foolishly reflect useful information from another group. Alternatively, perceived competition might create an exaggerated fear of sabotage form the other group, predisposing group members to hoard or withhold information form other groups that might leave them vulnerable. p. 6
    These quotations add more focus to the problems that may be experienced by establishing the boundaries of the firms in this proposed software development. On the surface it may appear that the need to abort the idea of developing this software would be an ideal position. I would argue that noting could be further from the truth. It is the time and place that we find ourselves operating in that challenge us to work in a more decentralized manner. The technologies, the competitive pressures, the risks and the rewards would lead or motivate individuals to operate at this higher level. The risks are clearly articulated by the authors in this next quotation.
    The now-famous intelligence failures surrounding September 11 reveal a situation in which the sometimes conflicting goals of the CIA (intelligence gathering) and FBI (Criminal Prosecution) have created the perception of inter-agency competition for information, time, and access to key informants or suspects. p. 7
    One remedy that I could suggest may be effective would be for each company that has a working interest in a JOC would be entitled to the data and information that is available to the active members of the JOC. The ability to share information between the groups electronically is something that can be managed in an appropriate manner when the industry has the capability of a dedicated software developer as proposed here. Lastly the authors note that this intergroup bias may be a simple feature of the assignment of people to groups. What the technology proposal inherent in this blogs writings is attempting. Is to enhance the cross functional collaboration between the various disciplines involved in oil and gas. Hence this proposal provides the opportunity of eliminating one element of the intergroup bias.
    Competition is certainly a powerful driver of intergroup bias, but it is not actually a necessary precondition for the emergence of bias. Remarkably, intergroup bias will arise with little more than the mere assignment of people into distinct groups. p. 7
    "Group Territoriality"

    Group dynamics have a potentially negative effect on the dynamics of establishing the market as the basis of the JOC definition. If these group dynamics are not clearly defined and dealt with the effectiveness of the market and the firm will be at risk. The intergroup bias has a strong tacit concurrence to the definition described, as does Group Territoriality defined by the authors as.
    Organizational boundaries do not only serve to distinguish groups from one another, but also to help groups define themselves in a more absolute sense. Unfortunately, just as the former effect poses a threat to cross-boundary coordination through intergroup bias, the latter effect can have negative implications as well. p. 9
    and
    Once these items are identified as part of a groups territory, we suggest that they afford group members a sense of psychological ownership - claims to, or feelings of possessiveness and attachment toward, those objects. p. 9
    When we add the elements of the cognitive and motivational paradoxes to these group dynamics, I think we can see some of the reasons why group territoriality comes into play. There is a sense of urgency involved in many of the operations of oil and gas that can further affect group dynamics. Therefore I think that this should be an area of intense study during this development. Not to add further fuel to the fire, but there is a large disparity in many of the peoples acceptance and use of technology. Not everyone will have the same capacities to deal with the technologies and see the opportunities that others see.
    We classify these behaviours as instances of group territoriality action undertaken by a group or by individuals on behalf of their group which are designed to reflect, communicate, preserve, or restore the group's psychological ownership of its territory. Unlike intergroup bias, this preferential attention to the intergroup does not stem from the desire to improve the standing of one's group relative to others. Instead, this behaviour is more inward-looking; it stems from the need to respect and reaffirm the identity, efficacy, and security of the group with the organization. Nevertheless, group territoriality can constitute a significant barrier to emergent intergroup collaboration and information exchange. p. 10
    and
    Through marking and defining behaviors, group territoriality can often work against information exchange in decentralized organizations. These behaviours exaggerate each organizational unit's focus on itself, facilitating possessiveness and disregard for other units. p. 13
    and
    The second group need that undergirds group territoriality is the need to establish and maintain a sense of group efficacy in organizational relevant domains. This form of efficacy refers to a groups belief in its collective ability to organize and perform the activities necessary to achieve desired goals, At the broadest level, identification and protection of group territory helps groups to identify the goals they should aspire to achieve. Moreover, when a group's territory is widely recognized by others, such recognition can serve as an implicit endorsement of the group's efficacy in related domains. Control over group territory further enhances a sense of group efficacy by assuring groups of ready access to resources that can facilitate their accomplishments. p. 14
    Finally a positive attribute of the times that we find ourselves in is the long term shortage of people in oil and gas. This is providing a level of job security that I have not experienced in the 30 years that I have worked in oil and gas. The authors point out that a secure environment is a precursor to dealing with issues.
    When a group feels secure in its environment, it can more easily develop expectations of and predictions about its environment, which can facilitate the planning and execution of activities. p. 14
    "Poor Negotiations Across the Organization"

    This next topic would be something that is totally new to me. I will leave it to the authors to define the issue and their solution and then I will comment at the end.
    The final barrier to effective cross-boundary information sharing we discuss involves the poor strategies used by members of different organizational divisions when they negotiate with one another. p. 15
    and
    Nevertheless, both parties commonly focus only on the claiming aspect, and destroy value for themselves and for the broader corporation. These failures are due to both faulty cognitive assumptions and to the failure to follow insightful prescriptions about how to negotiate more effectively. Perhaps the three most important cognitive errors are the myth of a "fixed pie" in negotiations, the failure to carefully consider the decision processes of one's negotiation partner, and the failure to recognize opportunities to negotiate in the first place. As parties enter into a negotiation, they too often assume that their task is to divide up a fixed pie of resources. Researchers have described this tendency to view competitive situation as purely win-lose as the mythical-fixed-pie mindset. p. 15
    and
    Related to the myth of a fixed pie is the cognitive failure to fully consider the perspective and decision processes of the other party. Though many people recognize the importance of "putting yourself in the shoes of others", ample research shows that most of us fail to do so. The price we pay for this failure is weaker negotiation outcomes. The key to creating value in negotiations is to identify areas where mutually beneficial trades are possible. p. 16
    and
    A last cognitive barrier to effective value creation in cross - divisional negotiations is that the parties fail to recognize that they are involved in a negotiation, thus missing the accompanying opportunity for value creation. pp. 16 - 17
    This last point being the key from an administrative point of view. My perspective of being in accounting, audit, and systems has been skewed by wanting to provide the best services to the operational areas. I would suggest that many of the earth scientists and engineers can better appreciate the point of view of the authors.

    "Leading Emergent Collaboration"
    The challenges to effective emergent collaboration have a number of implications for effective leadership in decentralized organizations. Accordingly, we focus this next section on three key recommendations leaders may explore in order to overcome the threats of intergroup bias, group territoriality, and poor negotiation norms. p. 17
    "Link Group Interest to Super-ordinate Interests."
    They attacked competition as the root cause of the bias, and simply presented the groups with tasks that each group could only achieve through cooperation with the other. Faced with necessary cooperation, the groups began to exchange help, information and resources, they willingly shared the spoils of their achievements. While this demonstrates the power of the super-ordinate cooperative goals to facilitate cooperative behaviour, the result depended on the replacement of divergent group goals with the common goal. p. 18
    Just as actual competition is not necessary to promote intergroup bias, more recent research suggests that actual cooperative goals are not necessary to resolve it. p. 18
    In decentralized organizations, however, it can be important to retain and even emphasize the salience of distinct group goals and identities, so as to facilitate the efficient discovery of related resources and expertise. Focusing group members exclusively on a superordinate organizational identity may also distract members from thinking and acting in ways that are consistent with their group membership, diminishing their ability to provide the localized focus, perspective, and actions on which a decentralized organizational structure depends. pp. 18 - 19
    It should be made clear that no one group can achieve the superordinate goals, nor can one group give the organization sufficient richness and depth. Group members can thus be encouraged to see themselves as fundamental linked to out group members while remaining cognizant of the fact that the link itself depends on their ability to contribute localized expertise to the others. p. 19
    "Frame Collaboration as the Solution to Group Needs."
    The underlying drivers of group territoriality are the groups needs for a sense of identity, efficacy, and security. the natural impulse for groups and their members is to satisfy these needs by becoming inwardly focused, by utilizing group territory to meet these needs, and by engaging in territorial behaviours to protect their ongoing ability to continue utilizing the territory for those purposes. p. 19
    The key underlying issues here is that groups often seek to satisfy their needs by turning their attention exclusively to their own members and territory. They ignore or fail to recognize opportunities to satisfy their needs through, rather than in spite of, interference from other groups. p. 20
    Raising the profile of eagerness to collaborate as a dimension of identity can thereby create a self-sustaining meaning and salience in the organizational environment, as it encourages groups to refer to each other not only in terms of their territory proper, but also in terms of their approach to sharing and exploring territory. p. 20
    With the increasing popularity of cross-functional teams, it seems like it should be especially easy to sell collaboration to organizational group members as a way of developing new competencies and enhancing their sense of efficacy. However, because people are often drawn into collaboration across functional or disciplinary lines, group members may instead feel that they have been chosen to primarily "represent" and advocate for their group's ideas and approaches in the interaction. pp. 20 - 21
    By thus highlighting the prospect of substantial losses, leaders can capitalize on the groups need for survival and increase the willingness of groups and their members to accept the security risks posed by information exchange and collaboration. p. 21
    "Enable and Encourage Effective Negotiation Behaviours"
    The second aspect of getting organization members to negotiate effectively across the divisional boundaries is to establish strong explicit norms (especially during times of change or transition) that support information gathering, disclosure, and constructive criticism. p. 22
    This underscores the critical point in maximizing organizational value-creation during cross-divisional negotiations: optimal outcomes demand that a leader instill, and reinforce, norms that promote information sharing and discourage information hoarding. pp. 22 - 23
    Some might argue that a norm of information sharing and collaboration would destroy "constructive conflict" within an organization. We do not agree. We think that it is fine for divisions to compete along many fronts, including value claiming once the total value of the pie has been maximized. But, such competition should not destroy value. Just as organizations have norms against lying, deception, fraud, and hiding defects in products, we argue that organizations could also have strong norms about optimal collaboration across units. p. 23
    This last section of their document providing many of the solutions the authors have found to the group dynamics. I am unable to comment constructively on many of the points. I will however note that during my "online" studies for my MBA. I found it particularly difficult for most of the other students to offer or accept any constructive conflict in the discussions. The initial feeling is that conflict is something to be avoided and if anyone raises it they are not cooperating appropriately within the group. I tend to disagree primarily out of my type "A" personality, but also because I feel fundamentally that the contradictions and conflicts in life are the best means in which to identify and resolve issues. If the groups approach is to avoid conflict, then I feel that the groups approach is to get along and go through the exercise without any real debate. (Or argument.)

    These last two blog entries have dealt with some of the personal issues that we will face in these developments. How best to proceed from this point, I think, is to establish this area with some real research that provides us with key understandings of the unique involvement here. With this research we should be able to identify many of the tools necessary to mitigate the problems and maximise the opportunities. Tools such as a comprehensive code of conduct that adopts these principles and research findings, and I am certain that most of the real issues remain undiscovered as we proceed down this road.

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    Monday, September 03, 2007

    The constraints of code and customers.

    I have commented many times about how this project is a clean slate approach to systems development. This may simply be a diplomatic way of stating its obvious vapor-ware status. What I mean is that the software development business is unique in that constraints of code and customers eventually become impediments to instituting any change. This may be ideal for companies such as Microsoft but for an Enterprise Resource Planning (ERP) vendor, and particularly for the oil and gas industry, nothing could be further from the truth. The two constraints of code and customers are also related and affected by the motivational and cognitive paradoxes of the users of the system.

    I consider these constraints of code and customers to be unacceptable to the best interests of the users of this system. The motivation has to be for the users to influence the development that they need and want. (Using software such as this enables the community.) If it is necessary to rewrite some code, or the users decide to archive an entire module, then it will be done. The primary focus of the developments should be accuracy and increasing the productivity of the users of the system. Productivity increases are not static. How can an industry continually increase the capability and functionality of their systems on a constant basis? This blog entry will show how I think these software development should be done.

    Firstly let me try to explain what I mean by better defining these constraints.

    • Code: With the progressively increasing size of installed computer code, the costs to the software developer to change and innovate become increasingly more difficult to justify.
    • Customers: With progressively greater numbers of clients using the software developers code, the costs to upgrade the installed base of customer’s code and associated support revenue, do not support change and inhibit innovation.

    My findings also show that the ability for producers to secure the necessary ERP systems, irrespective of the software development method used, is contingent on the active involvement of their money, time and people. These are the resources necessary to develop systems that specifically fit the producers' needs. Over the past 20 years we have seen how the speculative model of software development, either international or local in origin, has failed to provide the oil and gas industry with optimal systems. I attribute these failures to the inability of any of the software development projects to be influenced by the users. Without user involvement, no quality systems will be built. This blogs purpose is to start the conversation among users, get them involved, and ensure the developments are what are necessary to function in the exploration, exploitation and production areas of oil and gas.

    Using the Web Services paradigm, users will access People, Ideas and Objects systems any time and anywhere. A producer's specific software installation is not part of the design specification, however, it may be an option that can be accommodated. The data and information integration costs will be borne by the individual producers and be offered as part of the users domain of business service offerings. The total costs of this development and its associated costs will be shared by the producers that use it. Bringing the costs of software development to a small percentage of what has been incurred in the past. A method of assessing these costs has not developed at this time, neither has the community of users or their business offerings formed as of yet. This being a classic chicken and egg proposition that I have to resolve.

    In noting that there will be a variety of user based business offerings developed as a result of this software development. I am attempting to eliminate some of the associated user based impediments to active involvement and participation to the software's development. These impediments are known as the cognitive and motivational paradoxes. A brief introduction of these is as follows:

    • The "motivational paradox" arises from the production bias. That is, users lack the time to learn new applications due to the overwhelming concern for throughput. Their work is hampered by this lack of learning, and consequently productivity suffers. Carroll and Rosson (1998)
    • The "cognitive paradox" has its root in the assimilation bias. People tend to apply what they already know in coping with new situations, and can be bound by the irrelevant and misleading similarities between the old and new situations. This can prevent people from learning and applying new and more effective solutions. Carroll and Rosson (1998)

    What is of concern here is the quality of the development may be directly related to the users and contingent on the level of training they receive and understanding of the process, capabilities etc. Adopting this clean slate approach to systems development will take them time to adapt. Therefore, payment for these services is a given. Asking people to sacrifice their free time will sustain the developments only for a short period of time. Would some users consider it a full time job? Yes, I think that is possible and may occur, or users will develop their own businesses offering integration, training and associated services for the software. This community will need to be self-sustaining and possibly involve hundreds or thousands of individual businesses.

    As can be seen in this description the solution that I am proposing is not just the software development, which is the domain that I am concerned with, but all aspects of the user community and day to day administration of the oil and gas producers. An entire re-alignment of the industry based on the needs of the producers as specified in the module definition and the joint operating committees. However many independent business that are needed in order to undertake these tasks is defined by the needs of the producers. This community or "market" is part and parcel of the market definition of the boundaries of the firm. Contact me here if you would like to join me.

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