Perez, The New Technologies Part IV

Continuing on with our review of Professor Carlota Perez 1986 paper "The New Technologies: An Integrated View". I keep wondering what I would have thought of this paper if I had discovered it back when it was written. Clearly Professor Perez was well advanced in terms of her subject matter, but I'd be curious how this was initially received. The fact that it was not published in English until 2009 probably indicates it was a source of initial difficulty for the Professor.

If we look at the economy today, we see a pace of change that is refreshing in its ability to confront and confound the bureaucracy. Particularly in oil and gas, the management are flat-footed in their reaction to events. Going through the motions is the only reaction that management is able to muster. Pushing to optimize the inefficient and demand more from those that remain, these times are most certainly the beginning of the end, in my opinion.

In this post Professor Perez provides an understanding of what management will involve itself in this renewed economy.

A NEW MODEL FOR MANAGERIAL EFFICIENCY

In setting out what the role of management will fulfill in the new organization, Professor Perez provides a context of how the changes come about. Much of our experience in attempting to motivate the bureaucracy to fund this projects budget. Is really only the beginning of the difficulties that we should anticipate. Management does not share our concern for the markets demands for energy.

The diffusion of a new technological style is accompanied by a conflict-ridden trial and error process resulting in the construction of a new organizational model for the management of the firm. This process is extremely uneven and tends to spread by forced imitation under competitive pressures. The nature of the new model is shaped by the characteristics of the new technologies, in particular by those features most directly responsible for the quantum jump in productivity. In this section we shall explore some of the already visible elements of the new organizational model. p. 26

As each of this blog post is closed, the comment is made that we are committing to finding the right way to organize an oil and gas firm. It starts with the Joint Operating Committee (JOC), and we should not lose sight of the need to fully explore the potential of that organizational construct.

It should be noted that we are here treading much more uncertain terrain than in the techno-economic sphere. The final form taken by the organizational model at the level of the firm will be profoundly influenced by social and political factors. The general framework governing the eventual upswing will tend to favor some organizational forms to the detriment of others. p. 26

A. Systemation: The firm as an integrated network

It has been argued here before that management, due to a variety of reasons, have compromised corporate strategy across all divisions and properties. One of the advantages of using the Draft Specification is that each producer within a JOC can use their own unique strategy for the property. These strategies might be mutually exclusive to the other producers involved in the JOC. However, the strategy selected by the individual producer does not have to be a compromise strategy dictated as a result of too large a scope and scale of oil and gas company operations.

The typical organizational model of the previous paradigm was based on a clear separation between plant and economic management. Within each, the goal was to break down every activity into its component tasks, detecting repetitive routines which could be deskilled or mechanized. It was basically an analytic model, focusing on parts and elements of the process; it led to detailed definition of tasks, posts, departments, sections, divisions and responsibilities and resulted in complex hierarchies. The new paradigm is intrinsically synthetic. It shifts the focus towards links and systems of inter-relations for global techno-economic coordination. p. 27

People, Ideas & Objects proposes to provide the oil and gas industry with an ERP styled software development capability. This is not a static situation. The role of the Community of Independent Service Providers in developing new and better ideas and ways for people to interact around the JOC will never stop. This iterative loop between the software users, CISP and developers is an integral part of the new organizational model that Professor Perez suggests.

This term [Systemation as opposed to automation] has the advantage of shifting the accent away from mere hardware and emphasizing the systemic, feedback nature of the organizational “software”. We believe this to be an essential distinguishing feature between the new and the old model of firm organization. p. 27

and

Nor does it imply that they would constitute a single unit. If the old corporate structure managed multi-plant, multi-country operations, the new technological infrastructure would allow the efficient management of worldwide, giant, complex and rapidly changing conglomerate structures. p. 27

C. Centralization and decentralization

Just as a homogenized centralized strategy provides efficient centralized control, innovation, reserves, production and profits suffer. A decentralized strategy as suggested here will enable the innovations that increase the reserves, production and profits.

From what we have seen the new paradigm tends to favor both the very large and the very small. The same sorts of trends seem to appear when considering the optimal model of organizational control. To begin with, the hierarchical bureaucracies and economies of aggregation are radically questioned. The new ideal system is based on decentralized networks with local autonomy under central coordination. p. 28

And finally, rarely do we find the clarity of thought of where we are; as in this final quotation.

Bearing in mind the obvious limits to the analogy, it serves to make the organizational point quite clearly. A centralized decision-making system would have to be able to simulate every single possible combination of events with every single possible combination of elements and this is indeed a cumbersome and nearly impossible task. If organizations are to be diversified and flexible, to take full advantage of the new potential, they will probably tend to be based on flexible, interactive, relatively autonomous units, linked in adaptive on-line systems of coordination, under dynamic strategic management. p. 29

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 30 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not 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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Perez The New Technologies Part III

Our review to date of this critical 1986 paper "The New Technologies: An Integrated View" by Professor Carlota Perez has already produced two spectacular posts. The first post rooted in academia the thought that using the Joint Operating Committee is the common-sense approach. The second post detailed the matter-of-fact way that using the JOC will influence the productive and value generating capability of the industry.

This post provides support for the type of oil and gas operation and software development capabilities that will be successful in the near future. Moving away from the command and control nature of the bureaucracy to a dynamic industry is difficult to see at this point. Professor Perez helps us to detail the nature of this change.

IV. An exploration of the features of the new paradigm

From the previous discussion it should be clear that the effort we propose to undertake is not centered upon the electronics industry itself but in the trends generated in the whole of the economy by its development and the diffusion of its products. p. 18

We begin by examining the elements most closely related to the shift in the dynamics of relative costs; the impact this shift is likely to have on innovation trajectories and upon the mix of new products. Then, the new best practice production model, based on the characteristics of the new equipment, is analyzed. Finally, we try to identify the direction of change in the forms of organization and management of the firm. p. 18

NEW PARAMETERS FOR INNOVATION TRAJECTORIES

The importance of the oil and gas industry to society is accurately reflected in the calculation of 270 billion man days per day. Never before have we been so dependent on an industry for our very survival. The way that the industry proceeds from here needs to change. The bureaucracies are too slow and cumbersome to operate in this new dynamic world. The ability to explore and produce adequate volumes of energy is slipping behind the market's demand. This situation will continue of course, and the Information Technologies will enable the changes necessary for the industry to keep up to the demand for energy.

The central feature of the new paradigm is the trend towards increasing the information content of products, as opposed to energy or materials content. This is a direct consequence of the radical and continuing change in the relative cost structure towards ever cheaper information handling and transmission. For this phenomenon to introduce a bias in innovation, it is not necessary to assume that the costs of energy and materials will tend to increase constantly in absolute terms. It is enough to suppose that the diminishing cost and the growing potential of microelectronics will tend to widen the gap into the future. With this prospect, one can extrapolate forward the already observed new trends in product and process design. p. 18

And here Professor Perez eloquently details the characteristics inherent in People, Ideas & Objects and the Draft Specification.

Small is more beautiful and more profitable than big; versatile, compatible, adaptable, are better than rigid. A programmable product is better than a dedicated one. A product capable of modular growth is superior to one with defined and static scale and potential. A product with greater speed of operation and response is preferable to a slower one. Any product capable of joining a network or becoming the center or an element of a system is better than an isolated one. Distributed “intelligence” is more efficient than centralized control. p. 19

and

These vast opportunities for introducing innovations in an ever-growing spectrum of applications and in an ever wider range of activities, multiplied by the number of successive generations of each equipment, indicate that the evolutionary trajectories of these new technology systems will stretch a very long way into the future. These series of innovations widen even further the field of action for the software industry. p. 20

That is the role of People, Ideas & Objects. To organize the communities of people who work within the oil and gas industry.

These new technology systems are the most likely to drive global growth for the decades ahead. Thus it is reasonable to expect that the most powerful and largest firms will tend to locate and concentrate in the most dynamic core areas of these systems. p. 21

Participation by users in these core areas is available. These are user-based developments that support the communities involved in oil and gas. The core areas of these systems are forming and organizing around the ideas of using the Joint Operating Committee. 

Moreover, using similar equipment, small and medium plants can achieve an analogous flexibility and high efficiency. Thus, high levels of productivity are no longer so dependent on economies of scale. p. 23

This last quotation reflects the common-sense nature of using the Joint Operating Committee. It doesn't matter what size the producer that owns an interest in a property is. It could be Exxon or a local start-up. Financial ownership drives consensus at the participant level. The only area of concern or focus is the property that is associated with the JOC, and the strategy that each producer selects. Having a dynamic capability, as reflected in the Resource Marketplace module of the Draft Specification gives an equality to all the producers. This is also one of the documented benefits of using People, Ideas & Objects, the Financial Resource Marketplace permits ownership of any size of producer firm to participate in the JOC and not hinder the development of the property due to a lack of financial scale.

C. Technological dynamism: Design as an integral part of production

Over the past few hundred years. Man has used energy to leverage labor 45 fold. I believe it was around 1870 that labor from machines produced more then man. At what point in terms of leveraging our intellectual capabilities are we at today? What is holding us back from experiencing these types of benefits? Are the infrastructure to do so in place today? Or are we waiting for the bureaucracy to fund People, Ideas & Objects?

The coupling of computer-aided design and computer-aided manufacturing (CAD—CAM), together with expected increases in the productivity of software development, tend to diminish the relative cost of innovation and shorten the learning curves. This turns engineering design into a capital intensive activity and makes it an integral part of the production process with a crucial role in determining productivity and competitiveness. p. 24

D. Supply adapted to the shape of demand

In this next section Professor Perez identifies the nature of the bureaucracies view of the energy market. One in which demand adapted to the supply of oil and gas. Now the dynamic requires a different point of view. China, India and other developing nations have as much right, and possibly greater financial flexibility, to consume energy as the developed nations. Energy prices have responded, and they will continue to respond to this new reality.

Under the mass production paradigm, in which productivity and profitability depended on the growth of massive markets for identical products, pressure towards uniformity in consumption patterns was a condition of economic growth. In essence it was necessary for demand to adapt to the shape of supply. The new model tends to revert this relationship. pp. 25 - 26

This should be welcome news to the oil and gas producer! Greater demand and higher prices. The problem is that higher prices have helped the management of oil and gas keep maintain the status quo. Higher profits from higher prices have enabled the management to not only keep control longer then they should have, they have enabled the management to endow themselves with compensation schemes that make bankers look timid.

Maximum plant efficiency begins to be defined by its capacity to address the specificity of the particular market environment in which it operates. Thus, systems in use could tend to be infinitely diverse, covering even the narrowest niches and the furthest corners of the market and growing modularly at the rhythm of demand. p. 26

We need to act. The move towards the future that Professor Perez describes is to build the software. We are far too advanced a society just to leave it up to the market or some government agency. We need to act.

The vehicles for achieving all this diversity are the new branches of software and systems engineering. Their task could be understood as the last phase of production of the new capital goods (where their final purpose is defined). Their activities play a double role in the expansion of production under the new paradigm. On the one hand, they allow the multiplication of investment opportunities downstream by designing the systems to cover an infinite variety of new product and service markets. On the other hand, they foster the growth of the upstream demand for equipment, components, telecommunications services and other products of the motive branches. p. 26

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 30 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not 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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Perez, The New Technologies Part II

Yesterday's post started our comprehensive review of this 1986 paper "The New Technologies: An Integrated View". Professor Carlota Perez provided the tools for analysis that prove the common-sense nature of using the Joint Operating Committee (JOC). Today's post provides further proof of the times that we find ourselves in, and the context within this project. Specifically why there is so much conflict between the bureaucracy. Professor Perez states "A process of structural change in the economic sphere of the sort we have been describing cannot occur without conflict." A message that I would send to the directors of oil and gas companies, shareholders and investors. In this post we will detail the characteristics of this conflict, the scope of the opportunity and how this should be seen as the beginning of the rebuilding of the oil and gas industry. Where the innovative oil and gas producer provides significant investment opportunity and value generation.

III. Structural change and socio-institutional transformations.

To move to the JOC as the key organizational construct of the industry. Requires that we build the systems to support and identify the JOC. Moving the compliance and governance away from the hierarchy (the reason for the conflict) to alignment with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. This alignment, aided with the software development capability of People, Ideas & Objects, provides the producer firm to innovate off the rapidly advancing earth science and engineering disciplines. This common-sense approach to the oil and gas industry will provide substantial increases in performance. The evidence to that last claim is through the following analysis provided by Professor Perez.

Once the main guiding elements of a paradigm are established and the radical shift in the relative cost structure becomes clearly visible, the new ideal model grows in complexity and coherence, going far beyond mere technical change. In practice, it affects almost every aspect of the productive system. p. 14

I respond to each of Professor Perez' nine points individually.

a) New concepts for organizational efficiency at the plant level; p. 15

Clearly this is applicable as the Joint Operating Committee is the operational unit of all oil and gas. Not just locally but globally.

b) A new ideal model for the management and organization of the firm; p. 15

And as indicated, the source of the conflict. Management are not interested in giving up what they have worked to secure. They are in the driver seat and will be left at the back of the bus in this move to the JOC. That doesn't mean that management will not exist in the new systems. It will be different with a much more advanced skill set.

Organizationally we also see the changes in the producer firm. Focusing on the earth science and engineering capabilities of the firm and applying those to their asset base will be the key to value generation.

c) A significantly lower level of labor requirements per unit of output, with a different skill profile; p. 15

The previously mentioned different skill profile with management will similarly affect most workers within the industry. The lower level of labor requirement is a must-have in the future of the oil and gas industry. With the ever increasing volume of earth sciences and engineering involved in each barrel of oil, we will need substantially more effective labor inputs per barrel.

d) A strong bias towards the intensive use of the new key factor in technological innovation; p. 15

People, Ideas & Objects focuses on the business of oil and gas not the Information Technology. However, the IT provides the means for making the proposed changes. Without the IT the changes are not otherwise possible, and it's only through the recent maturation of IT that moving to the JOC is possible.

e) A new pattern of investment favoring sectors directly or indirectly related with the key factor and connected to the new infrastructural network, itself the object of a wave of investment; p. 15

I can see this happening. Professor Perez has always noted that financial capital has done its job. The current financial crisis is recognition that their job is done. Now is the work of production capital. The Draft Specifications Resource Marketplace Module provides for this type of activity. Where producers and suppliers work together to build the types of tools and services that are needed as a result of the expansion of the sciences. This "marketplace" module creates the market for the purposes described here.

f) A bias, therefore, also in the overall product mix, resulting from higher rates of growth in key factor related sectors; p. 15

If production capital has to choose between the innovative oil and gas producer, supported by People, Ideas & Objects software systems, and the bureaucracy...

g) A redefinition of optimal production scales leading to a redistribution of production between larger and smaller firms; p. 15

This has already begun. Those individuals that can team up with like minded people are able to establish significant production in very short periods of time. These teams have been discovered by the Shell's and Exxon's, and are finding a ready market for their skills. Within a short period of time, as little as five years in some cases, these innovative producers can sell the producer firm for several billions of dollars. If these small start-up producers had the innovative supporting software of People, Ideas & Objects available to them, it would be anticipated that the time frame would reduce, the International Oil Company could quickly take over the management of the property and the market demand for energy would be satisfied. I would anticipate that these "teams" would be able to generate larger production profiles in shorter periods of time with People, Ideas & Objects.

h) A new pattern of geographic location of investment as the new model redefines comparative advantages and disadvantages! p. 15

I'm surprised that this attribute is happening as well. The Preliminary Research Report was directed at the Canadian producers as its market for software development. I suggested in the report that if they didn't act, they would soon find the Calgary marketplace becoming a branch-plant of Houston. Unfortunately that is happening. Shell and other producers have moved their head offices out of Canada, and each day more decisions are made in Houston. This may also be a result of having two clusters of producers on one continent. Based on my statistics, either way, Canada, as a marketplace for People, Ideas & Objects, stands at a mere 3% of the U.S. marketplace and slightly behind South Korea.

i) New areas of concentration of the most powerful firms, replacing those prevailing in the previous paradigm. p. 15

I'm not sure, but this maybe the focus of the U.S. industry being the U.S. marketplace. If so then we can assume that the scope of the People, Ideas & Objects application modules will be defined by the users as the American producer focused on U.S. based production. And I'm good with that.

Professor Perez moves on to defining the effect of the financial crisis, and why it is human nature to have to go to such extremes of failure before we implement the necessary changes.

In the same manner, when a new techno-economic rationality propagates in the productive system, it becomes necessary to effect vast transformations in society as a whole to allow the deployment of its growth potential. p. 15

and

The crisis is truly a process of “creative destruction” but not only in the economy but also in the socio-institutional sphere. The new upswing can only be unleashed by means of vast socio-institutional innovations, in response to the requirements of the new paradigm and geared to facilitating the full transformation seething in the productive sphere. p. 16

Please note this "full transformation" whether that is with People, Ideas & Objects or another unknown system, will not occur without the software being built first. Spontaneous order as an economic phenomenon is questionable in today's society. Professor Perez states;

This process of social and political innovation is naturally long and full of conflicts. Nevertheless, production cannot be re-launched upon a lasting expansion path without re-establishing structural coherence, by arriving at a socio-institutional context capable of favoring the deployment of the new techno-economic potential. p. 17

And nothing along these lines will occur without the establishment of People, Ideas & Objects budget. We have much to do in terms of determining the right direction and processes.

Of course, the construction of a coherent socio-institutional framework, just as that of a techno-economic paradigm, is a gradual trial and error process, driven by the need to confront the various manifestations of the crisis and often hindered by the inertia of existing institutions and vested interests, associated with the old mode of growth. p. 17

With the petroleum industry responsible for offsetting 270 billion man days of physical labor each day, we have much to lose. I hope that we don't have to fully explore this crisis before we do something. And please remember none of the many years of development ahead of us will be easy. Clearly the bureaucracy will not act. And as Professor Perez suggests are too conflicted. Being part of People, Ideas & Objects is the beginning of how this process, the value generation of the oil and gas industry, starts.

This means that each crisis, each period of technological transition, is a point of indetermination in history. A quantum jump in potential productivity opens the way for a great increase in the generation of wealth. But the specific commodities that will compose that greater wealth and the way it will be distributed will depend on the socio-political framework arrived at. Historically, each transition has modified both the conditions of the various social groups within each country and the relative position of countries in the generation and distribution of world production. p. 17

Who will participate, and where is yet to be determined.

For each country, whatever the level of development reached in the previous wave, the need appears to make internal changes and to participate in the construction of a new world order. If the hypotheses presented here are a good approximation of the nature of the crisis and the means to overcome it, then, the best way to find criteria for a successful transition and make a leap in development prospects is a deep understanding of the new paradigm. This is possible because when the crisis becomes visible the paradigm has already diffused enough to be analyzed. pp. 17 - 18

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 26 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not 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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Perez, The New Technologies Part I

Professor Carlota Perez recently republished a paper that was originally published in 1986. This paper was originally published only in Spanish, and was translated last year to English by Professor Perez herself. Reviewing this paper shows many of the ideas that started her down the road to where she is today. I found the paper to be timely and applicable to the work we are doing here at People, Ideas & Objects, entitled "The New Technologies: An Integrated View" The paper can be downloaded from here.

Lets begin our review with a concept Professor Perez picks up with her "Techno-Economic Paradigm as Common Sense." Using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer has that "common-sense" ring to it. Lets begin our review.

II. Techno-economic paradigm as “common sense” models in the productive sphere

Applying her common sense paradigm to the JOC, we find the definition of what she considers to be required to qualify as "common-sense".

In order for a technological revolution to spread from branch to branch and on a world scale, more than word about a new technical potential is required. Coherent diffusion demands a simple vehicle of propagation, accessible to millions of individual decision makers. I have suggested that the organizing principle of the selection and structuring mechanism of each paradigm can be found in an input—or set of inputs—capable of exercising a determining influence on the behavior of the relative cost structure. This would be the vector carrying the new paradigm into the common sense thinking of engineers and managers.

This input or “key factor”—as we shall call it—comes to play such a steering role by fulfilling the following conditions:

a) Its relative cost must be obviously low and with a clearly decreasing trend;
b) Supply must appear as unlimited, for all practical purposes, regardless of the growth in demand
c) Its potential for all-pervasiveness in production must be massive and obvious; and
d) It must be at the center of a system of technical and organizational innovations, clearly recognized as capable of changing the profile and reducing the costs of equipment, labor and products. pp. 9 - 10

Clearly use of the Joint Operating Committee provides strong evidence of each of these requirements. Addressing each point on its merits it soon becomes "common-sense" to those within the industry.

A) Its relative costs must be obviously low and with a clearly decreasing trend;

Reviewing People, Ideas & Objects business model shows that the costs of development plus an element of profit provides significant cost reductions to what producers are paying the SAP "Juggernaut". Although industry wide total expenditures on ERP systems can not be defined, I would estimate them to be as high as one quarter of one percent of revenue, or up to $8.75 billion per year. Certainly we can effectively reduce these costs by developing the Draft Specification and the associated costs of the Community of Independent Service Providers.

This also needs to be put in the proper perspective with respect to the anticipated technical changes. Particularly those that are detailed in the People, Ideas & Objects Technical Vision. If these technological changes occur, what will the costs associated with the status-quo be? Will the costs remain as they are, escalate, or will the real costs be borne by a further erosion in the efficiency of the industry.

B) Supply must appear as unlimited, for all practical purposes, regardless of the growth in demand

The costs associated with increasing the number of users on the system is limited to the additional electricity consumed. These cost metrics continue throughout the life of the applications life cycle. Additional costs involved in changes, enhancements and innovations are allocated to the entire subscribing base of producers. 

Moving the associated technological costs from the individual producers to the industry provides substantially cost savings benefits. The key benefit is that the producer firm is able to focus on developing their earth science and engineering capabilities and applying these in developing their physical assets and productive capacity.

C) Its potential for all-pervasiveness in production must be massive and obvious;

Oil and gas is a complex and difficult business. Without the requisite overall understanding of how the industry operates and the influence of the Joint Operating Committee, it is difficult to see the overall picture clearly. The JOC is used systemically the world over. Used to mitigate risk, JOC's are formed to manage the joint assets. And as the aerial extent of areas of operations and facilities grow, more producers with financial interests in those properties are added to the complex of ownership interests in oil and gas.

This is the origin of the JOC and it has been established as the legal, financial, operational decision making, cultural and communication frameworks of the industry. Moving the compliance and governance of the hierarchy to be in alignment with the five frameworks of the JOC provides an organizational common sense of what and how the producers operations will be conducted.

Its not that moving to the JOC as the key organizational construct will provide the potential for all pervasiveness in production as Professor Perez states as necessary. It's that the JOC is all pervasive in production.

D) It must be at the center of a system of technical and organizational innovations, clearly recognized as capable of changing the profile and reducing the costs of equipment, labor and products.

People, Ideas & Objects isn't about the technology. It's about the business and how it is organized. What is the most efficient way to continue forward is dependent on aligning the many frameworks of the Joint Operating Committee to the various compliance and governance frameworks of the current bureaucracy.

Adam Smith's division of labor and specialization determined long ago that all economic value is generated through progressively more efficient means of organization. As we discovered in the Preliminary Research Report, organizations are defined and supported by the software tools they use. To change the organization therefore requires that we build the software first. The bureaucracy is constrained and this fact is reflected in the current performance of the producers.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 21 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not 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 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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Perez The New Technologies Preview

I'm preparing the many posts of our review of Professor Carlota Perez' paper "The New Technologies: An Integrated View". In this document it becomes very clear to me why the situation at People, Ideas & Objects is the way that it is. That is of course, it has to be that way. The situation that I am talking about is the strong conflict between this software development project and the existing bureaucratic ways and means of the industry. As much as I would like it to be less confrontational, there is no choice in the matter.

It's about competition. The old competing against the new. The old failing and being replaced by a bottom-up rebuilding of the industry. Professor Perez states;

The crisis is truly a process of “creative destruction” but not only in the economy but also in the socio-institutional sphere. The new upswing can only be unleashed by means of vast socio-institutional innovations, in response to the requirements of the new paradigm and geared to facilitating the full transformation seething in the productive sphere. p. 16

And as much as we would like to have this transition managed in a constructive way, that's not in the cards. The bureaucracy has made their choice not to support these developments. That fact is very clear to me, and hopefully that will become evident to the energy company shareholders, directors and investors in this 2010 budget drive.

What began as the expectation of an enjoyable review of Professor Perez' 1986 document. Has turned into the discovery of a significant piece of research. I don't know how many posts will be the result of the review, but I expect to take the time that a document of this quality deserves.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 21 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not 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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19, 20, 21...

Adding to the long list of compelling reasons that Directors, Shareholders and Investors should support these software developments. We add three more to total 21 compelling reasons.

We stand on the shoulders of several generations of giants.

As much criticism that we toss toward the bureaucracy, we must be careful to understand that the level of specialization and division of labor that is employed is significant. That to tear things down in a reckless manner would be irresponsible, and doesn't recognize the speed and altitude that our advanced societies and organizations are traveling at.

We also need to recognize that the bureaucracy can fail on their own. The need to have the alternative software and organizational constructs in place before they're necessary is something that we should be concerned about. Drawing an analogy to the banking industry, we can see that failure has its consequences.

Tacit knowledge drives software definition.

Tacit knowledge can not be captured in software. Tacit knowledge is how things are accomplished in oil and gas. And most importantly, how things are accomplished successfully. People, Ideas & Objects software development capability will provide users with the ability to develop the tools to use their tacit knowledge.

In an industry that is based on the earth sciences and engineering disciplines. Where each barrel of oil escalates the demands for ever more knowledge. The more effective deployment of human resources is challenged by these demands for more knowledge. Continuing to build individual scientific capabilities into each oil and gas company. To attain capabilities that are just-in-time for any anomaly, will bring about failure. Whereas through the Joint Operating Committee and the Draft Specification individual silo's are replaced by an overall industry capability that is pooled in each Joint Operating Committee.

The effective management of human resources in this fashion is inherent in the People, Ideas & Objects software application modules. Enabling the users of this software to build the tools to exercise their tacit knowledge is a necessary element of the future needs of the industry.

Enhanced Ownership Compliance & Governance.

This compelling reason consolidates the logic discussed in a number of recent blog posts. Our discussion of the role of government in funding the software development costs of their compliance requirements, particularly royalty compliance. Issuing legislation, regulations and assuming compliance does not consider the enhanced role of software in today's society. Professor Perez has challenged us to re-think the role of government. Government's direct involvement in developing the software for industry compliance is an area that we will continue to push for.

The directors, shareholders and investors want compliance to all governing legislation and regulations. These compliance requirements will be built-in with the transaction processing being built in People, Ideas & Objects Draft Specification. Compliance is a fall out of the transactions and actions being taken by the firms and their agents. Compliance should never be a driving criteria in decisions. One of the key value added processes in the Draft Specification is the Accounting Voucher Modules process for designing transactions.

With recent and prospective changes in the corporate board room. The role of directors, shareholders and investors is enhanced. Their direct involvement with the producers ERP system provider [or more specifically People, Ideas & Objects] enhances and enables greater compliance and governance for the owners and their direct representatives.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on these 21 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

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

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Two new papers for review.

A heads up that when we finish off with Professor Dosi's "On the nature of technologies: knowledge, procedures, artifacts and production inputs". Two new papers have been discovered that provide real value for the work that we're doing here.

The first is a 1986 paper from Professor Carlota Perez. Originally written in Spanish, it was translated into English by Professor Perez herself in January 2009. Reading it through provides a very clear understanding of the beginnings of her theories and ideas. The clarity is remarkable, particularly for those that are recent additions to this blogs community. The paper entitled "The New Technologies: An Integrated View" can be downloaded from here.

The second paper that we are going to review is from a new author. "The Evolution of Science Based Business: Innovating how we Innovate" by Harvard Professor Gary P. Pisano. Oil and gas is the ultimate science based business. One that is shifting in its complexity and difficulty. This paper can be downloaded from here.

There appears to be no end to the high quality academic research available on these topics. If your an enlightened producer, an oil and gas 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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Perez on the role of government

Back in 2005, when I first read the Strategy & Business Thought Leader Interview with Professor Carlota Perez. Professor Perez stated something that I found interesting and thought provoking. Her comment in the article was as follows.

S+B: What role does the government play in this?

Perez: A big role. I think that market fundamentalism today is as much of an obstacle to world economic growth in the next decades as state fundamentalism was in the 1970s and ’80s. Government needs to be reinvented, using as much imagination as it took to design the welfare state in the first place. It all seems impossible now, but things always seem impossible at this point in the surge. Between 1934 and 1946, a lot of economists believed that high unemployment was inevitable, because both industry and agriculture were shedding labor. But just after that, with an adequate institutional framework for mass production and consumption, the U.S. entered its biggest full-employment period in history.

Compliance frameworks have been how governments regulated business. Today, shareholders of firms have never felt more unable to deal with the businesses that they own. A systemic failure of the banking industry shows that boards of directors are powerless to deal with management. Bringing into question corporate governance and compliance as one of the premier issues that everyone would agree on.

This discussion about compliance may be about different perspectives on how compliance is achieved. I see compliance as a fallout of the transactions themselves. Net profits attract taxes. Oil and gas production incurs royalties. Stock exchanges impose transparency. In a transaction focused ERP software application as described in the Draft Specification. Where design of transactions is deemed one of the value adding attributes of a business, the Tax, Royalty and SEC requirements are not the driving attribute of the decisions being made. Or they shouldn't be. Granted interpretation of the regulations is the fine art that does generate substantial value for a firm. But these can be done on a global or overall firm basis after the fact. The point that is being made here is that compliance is a fall out of transactions. Secondly, compliance is a critical and inherent aspect of the transaction itself. Separation of compliance from the transactions is how Enron, WorldCom and Bernie Madoff achieved their scams.

In this post I want to propose a hypothesis of how things have became so disjointed. Based on Professor Perez' prompting us to rethink the role of government; have the software developers been the ones that fumbled the compliance football? Or has the lack of recognition of the importance of the role of software developers in ensuring compliance, been an inherent part of the breakdown?

In these past few days, when we have been discussing the compliance requirements of oil and gas producers. I have stated that the Compliance sub-frameworks of SEC, Tax and Royalty need to be aligned to the five frameworks of the Joint Operating Committee. The lack of alignment is part of the problem. I have also recently published the policies that People, Ideas & Objects has for compliance to royalties. That is we don't pay for the software development costs of any royalty framework. Since 1993 it has been my experience that producers won't pay for royalty compliance software development. It's 2010 and not one system exists to properly calculate a producers obligation. The evidence is in. Our policy is that the royalty holder will need to pay People, Ideas & Objects to develop the royalty compliant software. It's a compliance policy that is either 100 or 0% compliant. This is particularly valid when the Alberta Government is looking into it's sixth review of royalties since 2007.

The government's role in these situations has always been to pass legislation, enforce and administer the regulations. Why have they not funded the software that maintains the compliance for the oil and gas producers? Everyone at the table has someone who is paying their costs, except for the software developer. Governments toss these regulations out, expect compliance and its the lowly software developer who is required to fund the development of the software? We have no skin in the game, and are indeed hesitant to employ anything but the 0% solution. If compliance is such a large issue in today's business market. Why are the governments leaving it to a disinterested groups of software developers, who in turn have to sell what they did to uninterested investors or the producers themselves. This is a lose, lose proposition.

I think this is one of the areas where Professor Perez is correct. The software development costs associated with the compliance frameworks [royalty, tax and SEC] should be funded directly by the government agency that demands compliance. This is an area where government needs to think how they can be more effective in their responsibilities to their stakeholders. We are relying on an administrative framework that is a generation or two behind the fact that software is a critical piece of the compliance world.

Another point is that government's writing generic applications to maintain compliance won't work. The analogy of putting a 1956 Soviet Lada engine in a 2010 Ferrari is appropriate. Just send the cash. The JOC's decisions have compliance implications. Compliance needs to be natural elements of the processes, written by the same developers, in the same programming languages, designed by the same users. Therefore to integrate them, the software developers have to do the functionality and the compliance. For those governments that are concerned about funding several software firms, that's not my problem. Making the regulations more easily integrated might be an area where value could be generated.

People, Ideas & Objects face market, financial and technical risks. If we manage our cash in an effective manner. And are able to internally fund the compliance development costs ourselves. And then in the eleventh hour, when the application is 95% complete and everyone is exhausted, the producers lose the desire to continue funding People, Ideas & Objects. This type of financial failure is the primary cause that software systems have failed. With approximately $1 billion in projected costs, we would be foolish to even attempt to build a compliance framework ourselves. Particularly with a government such as Alberta's that changes the rules every six months.

One last point is that People, Ideas & Objects is user based developments. Our objective is to provide the oil and gas producer with the most profitable means of oil and gas operations. Think of this compliance issue from these user and producer orientations. And that does not mean that we just skip compliance, and that does not mean that we will fund these costs ourselves.

On a related note to this, here is a video of British Conservative Leader David Cameron talking about "The next age of government". He also has some answers.



If your an enlightened producer, an oil and gas 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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Top 18 Compelling Reasons

As promised an updated list of the reasons that users and producers should get involved with People, Ideas & Objects.

Twenty Trillion

$20 Trillion in additional capital expenditures to meet the market demand for energy. This is the generally agreed to scope of the problem that faces the oil and gas industry over the next 20 years. A business environment that is more difficult for all producers concerned. Success in the past is not a precursor to success in the near to long term.

$39 Billion Oracle Investment

What was once listed as a detriment is now a competitive advantage. Oracle has expended their money in a focused manner based on a broad vision of what IT could be. The vision became evident to People, Ideas & Objects during the five hour presentation explaining Oracle's revised strategy after their acquisition of Sun Microsystems.

As I write this we find that Oracle has beaten Alinghi 2 - 0 in the 33rd Americas Cup. Larry Ellison brings the cup home!

Williamson's Nobel

Transaction Cost Economics (TCE) has been formally recognized by Professor Oliver Williamson winning the 2009 Nobel Prize in Economics. TCE has been used extensively in the analysis and design of the People, Ideas & Objects Draft Specification.

Academics focused on organizational change and technology

We continue to see the premier researchers focus on organizational change and technology. The quality of the research being conducted is topical and valuable to the work being done in People, Ideas & Objects. It provides particularly strong support for the Users and oil and gas producers to get involved in this software development project. Giving direction on how to mitigate the fall out from the financial crisis and guidance as to where the future will provide the greatest value.

Fund the Budget

A call for $10 million during 2010 to support the user community and start the research and design work on the Preliminary Specification.

Value proposition - Competitive advantage

People, Ideas & Objects is based on a fundamental business model and value proposition. Producers collectively pay for the software development costs plus an element of profit for People, Ideas & Objects. This eliminates the large, costly and mostly ineffective SAP system installations that producers know don't work.

Our commitment to the oil and gas producer is that People, Ideas & Objects is the most profitable means of oil and gas operations.

User Interface

I recently documented how the User Interface (GUI) of People, Ideas & Objects would be based on Sun Microsystems Project Wonderland. Providing a "gaming" interface similar to the World of Warcraft. These will be of particularly value in the Marketplace Modules such as Petroleum Lease Marketplace, Resource Marketplace and Financial Marketplace. Where producers and users will be able to interact with other avatars and negotiate agreements, strike deals and all from the comfort of where ever they are physically located.

Perez the Information & Communication Technology Revolution (ICTR)

We are fortunate to be living at a time when the level of economic change is substantial. The old ways are being replaced by new and innovative means based on the Information & Communication Technology Revolution. Professor Perez has detailed the point where we are at in this fundamental transition. A transition to a far more productive way of life. Her work provides people with the understanding that economic stimulus is limited, and our future is waiting for us in organizational change and technology related areas.

Management is wrong

Management's Resistance to People, Ideas & Objects has been wrong. This is clearly evident as we look on the past 4 years. The time to move on making the change to the Joint Operating Committee as the key organizational construct of the innovative producer is today. Management are being called out by People, Ideas & Objects to make sure the transition begins as soon as is possible.

People, Ideas & Objects is Open Source

Although we do not qualify as a pure Open Source project. Our software code is open and available for the communities to review. Producers should establish an auditing procedure of the code to ensure it is compliant to their needs. These and other advantages of this openness are what People, Ideas & Objects is providing.

Penalty Structure of non - participation in People, Ideas & Objects.

For producers the costs associated with this software development project is fixed in terms of time. Effective January 1, 2010, all producers are being assessed a cost to participate in these developments. Companies that choose not to participate past March 31, 2010 will be assessed a 300% penalty when and if they do decide to join. Non participating producers will not be able to use the software until payment is made in full. And most importantly, producers who join later will have difficulty in asserting their needs within the established user communities.

Tech Company Earnings

Technology firms such as Apple, Cisco and Google are able to make substantial profits from their mature technology businesses. This is a trend that was noted in Professor Perez' research and is a direction that people can see is where the prosperous future lies.

Oil and Gas company earnings

Even with oil and gas prices being substantially higher then they were in prior decades. Costs have escalated and continue to do so. Oil and gas companies are seeing a downward trend to their earnings and production profiles. The business is becoming complex and those that were profitable in the low energy price era have no competitive advantages in this higher priced era.

Oracle

We are a customer of Oracles technologies. These technologies will be the standard component of the People, Ideas & Objects development environment, cloud offering, database, Java etc. Everywhere, from stem to stern, Oracle technologies will be deployed in making People, Ideas & Objects. This provides producers and users with a solid, reliable and scalable infrastructure in which to innovate and conduct their business operations.

Scrum / Agile

People, Ideas & Objects competitive advantages are many. One of these is the agile / scrum software development methodology that has developed in the last few years. Agile teams are 500 to 1000% more productive then prior methodologies. Velocity is the term used to note the speed at which these teams work. The overall reduction in costs and the faster turn around time are two of the larger benefits users and producers will realize through People, Ideas & Objects.

Complex Adaptive Systems is the technical term that captures the agile methodology.

Policies, Procedures & Positions.

Many policies, procedures and most importantly positions are being detailed on this blog. The positions include the Product Owners and Account Managers. Now is also the time for the user community and the Community of Independent Service Providers to begin their involvement in this software development project.

The five frameworks of the Joint Operating Committee

The legal, financial, operational decision making, communication and cultural frameworks of the industry are held within the JOC. Moving the compliance (Tax, Roy, SEC) and governance frameworks of the hierarchy in alignment with the JOC will define and support the innovative oil and gas producer.

Breaking the mirror. Actionable Transparency.

A concept that is introduced by Professor Carliss Baldwin in the "Mirroring Hypothesis". Actionable Transparency is a term that accurately captures the innovativeness of People, Ideas & Objects, the innovative oil and gas producers, working together to increase productivity.

If your an enlightened producer, an oil and gas 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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Perez Technological Revolutions III

Part three of our review of Professor Carlota Perez' "Technological Revolutions and Techno-Economic Paradigms" focuses on the organization. People, Ideas & Objects are building software that aligns the compliance sub-frameworks and governance frameworks of the hierarchy, with the five frameworks of the Joint Operating Committee. The hierarchy represents the Tax, Royalty and SEC sub-frameworks. These sub-frameworks are being moved to the Joint Operating Committee to align with the legal, financial, operational decision making, cultural and communication frameworks of all producers. This alignment eliminates the need for the hierarchy and its very ugly cousin the bureaucracy. In addition the Military Command & Control Metaphor is used to replace the governance framework of the hierarchy.

This alignment of the oil and gas firm and market frameworks, around the Joint Operating Committee, is a common-sense proposal that strikes everyone with the "but of course" response.

7. The emergence of a techno-economic paradigm

It is clear in my mind that I believe the Information & Communication Technology Revolution (ICTR) will have a remarkable impact on productivity in oil and gas. This is however, not a shared belief.

No matter how important and dynamic a set of new technologies may be, it only merits the term revolution if it has the power to bring about a transformation across the board. It is the techno-economic paradigm (TEP), being articulated through the use of the new technologies as they diffuse, that multiplies their impact across the economy and eventually also modifies the way socio-institutional structures are organised. p. 194

In Professor Perez' writings it is explicit that the reason for these transitions from one organizational structure to the next is due to competition. The competition coming from the new technologies applied to existing industries. For example, the age of steel enabled new ship builders with larger hulls and faster speeds to eliminate the needs for boat makers based on wood and other materials.

7.3 New organizational models

The alignment that is being captured in the People, Ideas & Objects software would not be possible ten years ago. It probably is only attainable with the tools and architecture that is available today in the Oracle technology stack. The Joint Operating Committees have existed "virtually" as a means for companies to deal with the unique characteristics of the partnerships represented. To move the industry to this new method of organizational structure is only possible with the demand for more efficient systems.

Finally, the TEP incorporates the criteria for best organisational practice. As the new technologies transform work and consumption patterns, they also transform the way factories and businesses are organised. Regular practice in the use of these technologies and in relating to the new conditions in the market contributes to the establishment of new principles of organisation that prove superior to the previous and become part of the new common sense for efficiency and effectiveness. P. 197

A common sense for the industry to move from the Joint Operating Committee being virtual to more tangible, focused and innovative. Two of the primary benefits of this transition is the alignment of operational decision making with the compliance framework. Achieving for the first time in oil and gas, direct accountability. This has the secondary follow on effect of identifying who within the organization is continually making the same mistakes and who is building the value. It is critical for an innovative producer to have these attributes, and it is clear why the bureaucracy has fought so hard to eliminate People, Ideas & Objects from the marketplace.

In each case, the paradigm shift in organisational and business logic becomes widespread and modifies business models and strategies so that the ones that are more compatible with the general logic of the new paradigm prove to be more successful, become highly visible and are increasingly imitated. Thus the TEP is further enriched and the process is self-reinforced. P. 198

What the bureaucracy should consider. Is now the time when this common sense organizational construct, the Joint Operating Committee, be supported and defined in the software of People, Ideas & Objects, based on the Oracle technology stack, with the dynamics of the high-cost era of energy upon us, and the associated disruption of the financial markets defining a new world order? Is this the time that the bureaucracy should stand and fight for its turf, or concede and actively support this software development project?

A techno-economic paradigm is, then, the result of a complex collective learning process articulated in a dynamic mental model of the best economic, technological and organisational practice for the period in which a specific technological revolution is being adopted and assimilated by the economic and social system. Each TEP combines shared perceptions, shared practices and shared directions of change. Its adoption facilitates the achievement of the maximum efficiency and profitability and its diffusion provides a common understanding among the different agents that participate in the economy, from producers to consumers. P. 198

We will know the answer to these questions by March 31, 2010. The deadline in which the 2010 Budget & Planning commitments are due. People, Ideas & Objects are based on such a radically effective value proposition that the bureaucracies determination that no, this is not the time, should be seriously questioned as to who the bureaucracy works for.

8. Diffusion, resistance and assimilation of successive techno-economic paradigms

This conflict between People, Ideas & Objects and the reigning bureaucracy has continued unabated since September 2003. The time in which the proposed research be undertaken. Much has happened to make the research valid and the timing has turned in People, Ideas & Objects favor. Professor Perez suggests diplomatically this "organizational inertia" is at a cross roads as well.

Organisational inertia is a well known phenomenon of human and social resistance to change. In the market economy, however, inertia is overcome by competition, which, by showing the direction of success, serves as a guide to best practice and as a survival threat to the laggards. p. 198

This "survival threat" is a business issue that the oil and gas investor and shareholder should assess in the current market. Is the cost of supporting the software developments of People, Ideas & Objects worth the alternative means of organizing your oil and gas assets?

Even in the economy, under the pressure of competition, the profound and wide-ranging changes made possible by each technological revolution and its techno-economic paradigm are not easily assimilated; they give rise to intense resistance and require bringing forth even stronger change-inducing mechanisms. It is the younger generation that never learned the practices of the previous paradigm that most naturally adopts and applies the new principles. p. 199

It brings me great pleasure to be legitimately offering this opportunity. An opportunity that has far reaching consequences for all involved. What will the markets decisions be on or before March 31, 2010?

Eventually, the new TEP becomes the shared, established and unquestioned ‘common sense’ both in the economy and in the socio-institutional framework creating a clearly biased context in favour of the trajectories of the technologies of the revolution and their use across the economy. This adaptation generates externalities that operate as an inclusion–exclusion mechanism to encourage compatible innovations and discourage incompatible ones. This is an important part of the explanation of why change occurs by revolutions. Thus, techno-economic paradigms act as context shapers in favour of one revolution and—through over-adaptation—as hindrance and obstacle for the next. p. 199

The word revolution never had so much meaning as it does in this context.

Hence, each great surge of development involves a turbulent process of diffusion and assimilation. The major incumbent industries are replaced as engines of growth by new emerging ones; the established technologies and the prevailing paradigm are made obsolete and transformed by the new ones; many of the working and management skills that had been successful in the past become outdated and inefficient, demanding unlearning, learning and relearning processes. Such changes in the economy are very disturbing of the social status-quo and have each time accompanied the explosive growth of new wealth with strong polarising trends in the income distribution. These and other imbalances and tensions resulting from the technological upheaval—including a major financial bubble and its collapse (Perez, 2009)—end up creating conditions that require an equally deep transformation of the whole institutional framework. It is only when this is achieved and the enabling context is in place that the full wealth-creating potential of each revolution can be deployed. p. 199

9. Putting everything together: Regularities, continuities and discontinuities in technical change

One of the more refreshing attributes of Professor Perez' writings, is it just writes itself.

The vehicle of that wide-ranging change of direction in innovation is the techno-economic paradigm, which is a best practice model gradually emerging from practical experience in applying the new technologies. It indicates the optimal, most effective and most profitable way of making use of the new innovative potential. Each TEP articulates a basic set of principles that serves as an envelope encompassing the trajectories of individual technologies and shaping their preferred direction. The TEP propagates together with the new technologies producing the surge of development. Its influence extends from the business sphere to institutions and society so that, as its adoption advances, it becomes the shared common sense for decision making in management, engineering, finance, trade and consumption. This new logic and its capacity to increase effectiveness and efficiency eventually also shape institutional and social organisations, expectations and behaviours. p. 200

And this next paragraph has been a guiding principle to ensuring that the flexible framework for this revolution is enabled in the People, Ideas & Objects application and communities.

The mutual adaptation of technology and society through the social learning of the paradigm and the adaptive redesign of the institutional framework enables reaping the maximum benefit from the wealth creating potential contained in each great surge. But,when this potential is exhausted and a new revolution begins to emerge, those embedded habits and institutions act as a powerful inertial force and must be transformed to enable the next surge. This understanding of the influence of technical change on long term economic growth is one of the key contributions of evolutionary economics to the comprehension of macroeconomics as dynamic and historically shaped. It is no longer possible to ignore the specific technological revolution being diffused and its stage of deployment. p.200

And how pleasant and smooth this entire process can be.

On the view being described here, the notions of long run equilibrium and continuous progress are rejected in favour of more complex processes of overcoming multiple disequilibria originated in massive innovation, in internal differentiation within and between sectors, of creative destruction, assimilation, learning and unlearning successive technological spaces and best practice models and of reaching and overcoming maturity through successive surges of change. The changing rhythms of growth and the processes of structural change and increasing productivity in the economy can now be understood as driven by identifiable technical change and as shaped by the diffusion of successive technological revolutions. p. 200

Winners and losers will be assessed on such criteria. Where will the bureaucracy stand on March 31, 2010. Professor Perez reflects that these are not situations that are difficult to see. It is common sense.

Taken together, the micro, meso and macro views of how technologies evolve show that it is possible to recognise the nature of technology, its forms of evolution and its interrelations as an object for social science analysis and as a way of embedding economic theory in the dynamics of its interaction with technology and institutions in a changing historical context. p. 201

If your an enlightened producer, an oil and gas 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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