Dan Pink on Motivation

Here is a remarkably entertaining and interesting YouTube video of Dan Pink talking about motivation.



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Professor Thomas Malone on Organization

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

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

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

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

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

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

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

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

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

and

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

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

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

and

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

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

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

Our appeal should be based on these eight "Focused on" priorities and values of how better the oil and gas industry and its operations could be handled. They may not initially be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are. If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Two points of interest.

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



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

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

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

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

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

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

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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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Professor George Schultz on MIT Video

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

Secretary Schultz starts his presentation by stating his thesis.

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

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

His recommendations are:

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

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

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

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

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

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

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

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

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

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

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

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McKinsey, Strategy Through Turbulence

I can not reflect on the past four years on this blog without closing out the year by noting the significant contribution that McKinsey Consulting have provided us. This is the 64th article that I have written about here on this blog. And more then just the numbers, the topical nature and focus on the changing business times that we find ourselves in. They have done a great service to their clients and I think they have established themselves as the number one consulting firm for the twenty-first century.

This article is a brief eight minute video that summarizes everything that we stand for here at People, Ideas & Objects. The opportunities, turmoil and change are all themes that underlie the research and system specifications. It is of Professor Don Sull of the London Business School. Who talks clearly about the times we face. He also has a new book that I would recommend putting on your reading list as well. Enjoy!

(Embedded video may not render, please see the original McKinsey site.)



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Data and the Military

People, Ideas & Objects have define a Technical Vision that identifies and works to mitigate a technical issue that all areas of society need to address. The issue is the ballooning of data. Noted in National Defence Magazine an article entitled "Military Swimming in Sensors and Drowing in Data" it is stated “The appetite never seems to slow down.” As the energy industry is mostly based on the science of physics, chemistry and biology, it is believed this data growth will fuel innovative use and application in the industry. Those firms that have the capacity and ability to deal with this volume of data will have competitive and financial benefits arise from this capability, but only if this software development and community are funded.

The Community of Independent Service Providers and People, Ideas & Objects - Technical Vision suggests four cornerstone technologies enable this data explosion. At the same time, these technologies provide the ability to deal with the problem / opportunity. The four technologies are;

1. Object based technologies, and particularly Java.
2. Asynchronous Process Management.
3. IPv6
4. Wireless.

Further information on the Technical Vision can be found here.

Today's blog of Richard Fernandez notes this issue is affecting the U.S. Military. And of particular concern, is today's Wall Street Journal video of how Predator Drones have been monitored by insurgents. (If that specific URL doesn't work, search WSJ's video site for Predator Drones.) This issue of the Predator Drones is also noted in Fernandez's second blog post.

Some may note "This explosion of data has occurred for the better part of the last 40 years. Computers have always presented this difficulty and the energy industry will address this problem as it has before." I hope not, because the volume of data and the ability to use that data are something that will have to be purpose built and dynamic. What can be monitored can also be controlled.

People, Ideas & Objects has listed this Technical Vision as the manner in which this community will approach the problem. By exploiting the advantages and having the commercial benefits accrue to those that have a handle on them, I think, will be the difference between success and failure in the oil and gas industry. Critical to the success of the oil and gas producer will be this change oriented and innovation supporting community and application.

The Draft Specification considers a scenario where the use of this type of data and the ability to manage it is possible in a fundamentally more profitable way. The example is the manner in which energy prices can dictate, on a pre-determined and agreed too basis, at what price level would trigger the production was scaled back. If prices were to drop a predetermined percentage, then the production would be autonomously scaled back by X%. And these decisions could be executed on an iterative basis to fully exploit the reserves of the specific Joint Operating Committee (JOC).

These are business decisions that can be made by the Joint Operating Committee as it holds the legal and operational decision making control of the reserves underlying the property in question. (And something today's bureaucracies can not even begin to consider.) If the JOC has the authority, and the legal agreements consider this opportunity, then the industry can move from a price-taker to a price-maker position. This last point should be coming more evident as a necessity in the industry. Leaving everything to produce at 100% and then watch the prices drop year after year must get a little tiring. Only a fool would continue to sell his resources at a price less then its cost. And in an escalating cost environment, we have many managers who know they do not have the tools to deal with this problem, and yet will not support this software development project and associated community.

If it is generally agreed by the producers that an additional $20 trillion will be spent on oil and gas operations in the next 20 years. I would suggest the producers attain these types of capabilities so that they can prove to their shareholders they have the capabilities to address these difficulties and profit from them. Or is it really assumed that the bureaucracies can exist in that prospective environment, and provide returns to those outside of their own management team. Please join me here.

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McKinsey on Enterprise 2.0

We have an interesting video of Professor Andrew McAfee talking about technologies under the label of Enterprise 2.0. This will be the fourth time that I have highlighted McAfee's work and the sixty third McKinsey article. All I can say is I'm glad this body of work is behind me. I still have many McKinsey articles that I want to write about, just not enough time in the day.

Professor Andrew McAfee coined the phrase and defined what "Enterprise 2.0" is and means. Particularly from the point of view of how organizations will be affected by these technologies. Like the recent discussion of Google CEO Eric Schmidt, McAfee is not talking about the technologies for the sake of the technologies but the massive impact that the Information Technology revolution is having on business.

Last time I highlighted the work of Professor McAfee and his Enterprise 2.0 concepts he was at Harvard. He seems to have escaped and moved closer to the river by joining MIT and is now the principal research scientist at the "Center for Digital Business" at the MIT Sloan School of Management. He also has a book coming out called "Enterprise 2.0: New Collaborative Tools for your Organization’s Toughest Challenges". Lastly the McKinsey article has this video presentation of this paper. (Video is available here.)

McKinsey ask a number of pertinent questions. McAfee's answers provide real value for this community in terms of what and how "Enterprise 2.0" and People, Ideas & Objects application modules will affect today's work place. The following is how I see it for oil and gas.

McKinsey: How is Enterprise 2.0 changing the way we work?

McAfee's answer to this question is in line with the collaborative developments of WikiPedia. How the initial start attempted to control the contributions of people, and only after scrapping the process and leaving it to self organized teams did the value, quality and quantity increase.

I see a much larger change. The 7 / 24 clock will be the time people are available to work. Asynchronous Process Management, a cornerstone of the People, Ideas & Objects Technical Vision will permit people to work when and where they want. The office will not be used even half as much as they are today, and the quality of life will be substantially higher. When the computer screen looks the same at home or in the coffee shop as it does at the office, an office will become a place to go to concentrate. The rest of the day will be interspersed with personal and work related activities completed as required.

McKinsey: How do you get this started in an organization?

McAfee comments;

There’s a lot of debate about that question right now. And the debate is typically between people who advocate [a top-down approach and those who advocate] almost a purely bottom-up approach—in other words, deploy the tools, stop worrying about what’s going to happen, and get out of the way as the management of the company and let it percolate up from down below. Or, if you hear about a grassroots effort, encourage it, support it financially, but, again, get out of the way, let the bottom-up energy happen.

People, Ideas & Objects has chosen the bottom-up grassroots method of solving these problems and building the software based on the Draft Specification. I like McAfee's comment that if you hear of a grassroots effort, encourage it, support it financially. Music to my ears so start spreading the news.

This software development can not be a sustained and quality effort unless the users are compensated financially for their time. This is a big part of our budget and defines why our approach is different from the rest of the marketplace. As McAfee states in this document, developing the community takes time and effort.

McKinsey: What else can undermine adoption?

McAfee notes the unreasonable time frames put on by management. People, Ideas & Object software developments, or any collaborative project, will not be zipping along before the end of the quarter. Such expectations are how the hierarchy greases the wheels with the consumption of human energy and spirit.

Another failure mode is to be too concerned about the possible risks and the downsides. If we get wrapped up in those, we’re not going to take the plunge and actually deploy any of these new tools and turn them on and encourage people to go ahead.

I don't see the downside here. Collaboration brings many risks to the bureaucracy. However their risks are the result of the collaboration out performing the bureaucracy. I can live with those risks, and I think that McAfeee's audience is different to those of this blog. He is preaching to the unconverted and as such has to hedge his comments while he moves the Trojan horse into place.

McKinsey: What is the CIO’s role in encouraging Enterprise 2.0 and managing the risk?

McAfee notes;

A lot of them see their roles as essentially conservative, though. In other words, “My job is to not increase the risk profile of this organization before everything else.” That’s a legitimate concern, it’s a legitimate job for the CIO, but all my experience so far tells me that Enterprise 2.0 doesn’t increase the risk profile of an organization.

This is probably why I get in so much difficulty with companies. I ask sarcastically what's a CIO? I don't see them surviving in the long run. Much like secretaries and draftsmen these positions may disappear rather quickly. These types of comments should be directed to the CEO or the CFO as they have the proper authority and responsibility to make the decision.

In my presentations to the industry I noticed something that I had never learned or considered before. When I talk to CEO's or CFO's I feel there desire to pick up People, Ideas & Objects software developments. Why they haven't is that they would do serious damage to their firms by changing direction to quickly, without the urgent need and support for the change. They therefore pass on the opportunity until such time as we proceed to a point where they can make the change.

McKinsey: What does this mean for middle managers?

McAfee notes;

If you’re a middle manager who essentially views your job as one of gate keeping or refereeing information flows, you should be pretty frightened by these technologies, because they’re going to greatly reduce your ability to do that. They’re going to reduce your ability to filter what goes up in the organization and what comes down in the organization. And they’re going to greatly reduce your ability to curtail who your people can interact with, talk with, and receive information from. So if you’re inherently a gatekeeper, this is a real problem for you.

In my presentations to the industry it is this group of people that feel challenged by these technologies and the People, Ideas & Objects application. The class of workers known as middle managers career and position are toast. I don't foresee many of these people continuing to be effective in the very near future. If this is news to anyone in middle management, good morning.

McKinsey: How should companies measure the success of Enterprise 2.0?

McAfee notes;

Again, you see a lot of energy, you see a lot of people very willing to take a few seconds to answer a colleague’s question—even if it’s a colleague they don’t know. So when I see successful companies tackling this tool kit, I see them doing a little bit of thinking upfront about what problem or opportunity they’re trying to address, then deploying an appropriate technology in response to that. They then measure progress: How much uptake are we getting? What’s the traffic look like on this? Which is very different than measuring ROI, I think.

In the Preliminary Research Report I suggested that companies use the revenue per employee as a measure of an oil and gas firms performance. Revenue per employee can vary significantly from company to company based on the unique attributes of its asset base. It has direct application between producers and is an accurate measure of the firms current and future capabilities. This is particularly the case as those producers with low revenue per employee will have difficulty increasing the revenue factor without having to address a possible over staffing issue.

The purpose, or competitive advantage, for the Community of Independent Service Providers and People, Ideas & Objects software applications. Is to provide the innovative producer with the most effective and profitable means of oil and gas operations. Revenue per employee will be a critical method of how the community advances the science of management and business for the oil and gas clients using this software and community. Please join us here.

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Some uses of Google Wave

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



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

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

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

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

Please join me here.

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Paul Romer on BBC

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

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

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

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

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

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

Please join me here.

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Critical Issues and Grand Challenges,...

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

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

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

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

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

Reed's conclusion is as follows:

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

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

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

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

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

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

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

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The situation today.

I've come across a number of interesting comments and arguments that are reflective of today's economic situation. The overall level of optimism is impressive, and with these comments and arguments, one would find the appropriate posture to succeed in these changing times.

This first article is from the Endless Innovation blog and the blog entry is entitled "Darwin's Finches and Corporate Innovation". Apparently there was a drought on the Galapagos islands that caused 6 out of 7 Finches to parish. What was obvious was the size of the surviving Finches beaks after the drought were different from those of the Finches before the drought.

Endless Innovation goes on to note;

In the same way, the benefits of having the right innovation processes in place are often masked during good times. "Firms with both new and old technologies remain solidly profitable, happily hopping along... But when hard times hit, innovators survive. Most importantly, they flourish when the business cycle swings up again... But like Darwin's finches, the survivors are not just those who have more technology investments, but those who get the dimensions right." At the end of the day, downturns are not only good for innovation, they are necessary.  

The author reflecting on the fitness of the firm to weather the storm and survive. This thinking is also evident in McKinsey's February 2009 document entitled "The Crisis: Mobilizing Boards for Change". Although it speaks to the efforts that should be undertaken by boards, I think it is good advice for everyone. Starting off with the following questions ;

As companies grapple with uncertainty of a magnitude that few have experienced before, their boards should begin by questioning fundamental strategic assumptions: Is our view of the market realistic? Does our financing strategy take into account the new conditions? Should we reset the incentive scheme or abandon any approach based on share prices? Can we exploit the current glut of talent? How can we take advantage of the pain our competitors are experiencing?

Certainly times have become difficult in the oil and gas industry. By developing the People, Ideas & Objects application modules, producers would have the capacity to scale back production and even shut down the well or facility. What we have seen is the North American natural gas producer continue to produce as the prices decline to levels that can't support the costs of production. Why? And then, why did Chevron cease all natural gas drilling on the continent? Why didn't they cut production? Stopping the development of a companies reserves hurts the long term prospects, health and value of the firm. Selling current production at fire sale prices only further erodes the value of those reserves and shortens the firms reserve life index.

I think that oil and gas companies indulge in this type of suicidal behavior because its the only thing they can do. To shut-in or scale back production requires the Joint Operating Committee to make the majority decision based on a vote by the firms represented. A company like Chevron may have interests in thousands of fields. To think about the internal logistics of these decisions would scare even the most ambitious. However, if the People, Ideas & Objects Draft Specification was built. Producers would easily engage their partners within the Joint Operating Committee to make these types of decisions. And as I have said before, the system would provide the ability for producers to pre-determine the prices at which they would reduce production volumes. The alternative is the producer just continues to produce their reserves. An option that is proven to erode the natural gas marketplace.

One thing about this recession is the duration of not knowing. Not knowing which direction to turn. It is however times like these when most of the change comes into play. Like the Finches, natural selection allowed the species to survive, change will be the factor or ingredient that brings about the new. Just as this video shows the effects of these changes, we will look back on this time and see the importance of being fit and change oriented.



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MIT Video - Energy Secretary Steven Chu

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

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

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

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McKinsey on Risk

McKinsey Consulting are providing a 14 minute video of Peter L. Bernstein talking about risk. This is a fascinating and valuable video that I promise you will learn one or two things about risk. It's unfortunate that the video marks the passing of Mr. Bernstein, but I have put his book "Against the Gods: The Remarkable Story of Risk" in my library.



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It's Official, Everyone is an Entrepreneur

Reid Hoffman is on Charlie Rose talking about his company LinkedIn. Its not surprising that I just highlighted the LinkedIn service on Tuesday's blog post. This is a must view video, and keep in mind that everyone is an entrepreneur, entrepreneurs work in communities and People, Ideas & Objects is the community for those people that work in oil and gas. Please join me here.



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McKinsey Video of Professor Hal Varian

McKinsey continue to impress with this latest video of Professor Hal Varian. He holds the dual role of Google Chief Economist and University of California at Berkeley Professor; and general all around thinker in Silicon Valley. I noticed that McKinsey are at the World Economic Forum in Davos Switzerland. I think it is reasonable to assume they will be heavily stimulated at this key conference and we should expect many more quality ideas to come from them.

This video is entitled "Hal Varian on how the Web challenges managers: Google’s chief economist says executives in wired organizations need a sharper understanding of how technology empowers innovation." Suggesting we are at a point in time where the component parts are now available, or as he suggests "Combinatorial Innovation". The difference between previous periods where component parts became available, today's "bits" of IT based ideas and information are shared without costs and are available to most of the people on the planet. We truly live in interesting times when something so simple is a fact of life, amazing.

Professor Varian quotes Alfred Chandler's seminal work in the 1930's and how the telegraph and railroad had a defining capability in the formation of our modern corporation. I have frequently commented on my frustration with the 2 hour / day ritual of driving to the office and back. Stating this drive was a waste of resources and asking if these same people drove home to make a personal phone call? Professor Varian makes the following comment and its impact on the way in which work will be conducted in the very near future.

Instead of people going to work, the work goes to you. And you can deal with the work at anytime and anyplace with the infrastructure that is in place.

Varian goes on to suggest that the ubiquity and affordability of the Internet will provide for a significant boost in productivity. That knowledge and intellectual property (IP) will be the basis of value. This is wholly consistent with my sense that the future earning power of individuals will be based on the ownership of IP, or more importantly for this community, that People have access to IP.

Noting that IP has been revolutionized by the Internet. Today ideas are published as soon as they are conceived. (At least that is what I am doing here.) This is wholly consistent with the ideas that were used to establish copyright. The act of publication is how the copyrights are earned. Allowing the world to find these ideas and build on them is the net benefit to society. Varian says this revolution is over, with the people willingly publishing and promoting the sharing of ideas.

This video is short, around 10 minutes, but the comments that are made are dramatic in their matter of fact-ness and importance to the work being done in People, Ideas & Objects. Professor Varian looks at the seemingly unimportant transaction. How today we can and do so many more transactions through automation. Also how in the future many things can and will be contracted for, and how the ability to confirm a transaction is carried out appropriately.

Much of the work that went in to defining the Draft Specification was based on my understanding of the oil and gas industry, and the academic research in the area of transactions. This work includes most importantly Professors Richard N. Langlois and Carliss Baldwin. What the Draft Specification is designed to accomplish is what Professor Hal Varian suggests. I think as a result of Langlois' work, we have been able to move from a software system that processes transactions, to include the ability to design transactions with the objective of building value. Processing transactions in a software system is necessary functionality of any system today. The real value will be in the ability to design the transaction in a manner that ensures the value that is possible is attained. And that is one of the many things that makes People, Ideas & Objects different.

Professor Varian suggests that he thinks an area where there is going to be another revolution is in the area of services. The community that forms here is how the energy industry will conduct its operations. Instead of the producers employing people directly, service based organizations will provide the resources for the producers to profitably explore and produce energy. These services will have the software development capability and software tools that are being built here in People, Ideas & Objects. And this "Community of Independent Service Providers" as I have been calling them; will apply those tools in value added services to the producers. None of these services have yet been defined, let alone built. These services are a critical aspect of this software development. Those people that wish to join this community and begin to build this software, and their own associated services should follow this process.

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Robert Malone, on MIT video.

Achieving U.S. Energy Security Through Energy Diversity

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

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

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

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

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Cisco's John Chamber's on MIT video

Subtitled "Building the Next Generation Company: Innovation, Talent, Excellence."

And we are back once again. I have not solved all of my technical issues, but I should be able to post every business day.

Outside of these technical issues my biggest problem is that it has become obvious to most people that addressing the organizational structures of companies is needed. The economic difficulties we are experiencing are providing the opportune time for the future leaders to implement the changes in their industries. The sheer volume of analysis being conducted on this topic has grown exponentially. Not only has the quantity increased, but the quality of the ideas being generated has improved. Much of this thinking is directly applicable to the work that I suggest we undertake in the oil and gas industry.

This current video from MIT promises to provide some valuable input to those people that are interested in this project. I previously reviewed an MIT video of Cisco's Chambers a few years ago, and was very impressed with this man's communicativeness, if that is a word. He is a truly impressive and articulate presenter. So lets dig in.

Not willing to hedge his bets and mitigate the consequences of what he says. Chambers fires his first comments with this sweeping declaration. Show me a leader in oil and gas that has the gumption to say these types of things.

What is exciting is what has changed and at the same time what has not. When you look at the future of companies, I think we are going to see the most fundamental changes in business and government. Moving from command and control to truly collaboration and team work.

Noting the recession is definitely taking hold, Chambers states that this is the opportunity to make the necessary changes. At around 6 minutes he states the following 3 points as his economics 101 prescription for addressing the economic impacts on your firm. 

1. Understand the effect on your company. Was the problem the consequence of your own actions.
   
2. How long do you think the recession will last and how deeply will it affect your firm.
   
3. The first action that should be taken is to prepare for the upturn.
   

Chamber's states governments role in the economy will be expanded. Something that I have noted in the business model of People, Ideas & Objects. Governments, and particularly those that have oil and gas production as part of their economy, have a vested interest in making this software development project go forward. The second point relates to all industries. Governments need to support the software industry much in the same manner and mindset in building the "Eisenhower Interstate". Software is the future's infrastructure, without it the future will not be as efficient as it could. 

Chambers goes on to comment that creating a change mindset scares people. Providing a vision  helps people to understand and to support the changes that are necessary. The vision I see for the oil and gas industry, as reflected in the Draft Specification, provides an understanding of how, by using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer, it will provide the producer with the mindset and higher performance necessary of the future economy.

@ 12:30 Chambers talks specifically about business model innovation. Throughout this time he talks about the volume of productivity growth. That the Information and Communication Technologies would provide the ability for economies to exceed the expected productivity performance of most economists. From Chamber's perspective IT is not a cost, but an investment that provides real returns.

@ 16:20 Chambers recalls a discussion he had with Alan Greenspan of the Federal Reserve. Talking about the possibilities of heightened productivity from IT he notes that Greenspan stated "A new generation of innovation would be around the corner". Chambers I think has been one of the largest proponents of using IT with new business models and organizational changes. I only state this to square the circle of how these enhanced productivity volumes are achieved.

@ 18:28 Chambers notes that Cisco has moved from 1 or 2 major initiatives up to 26 initiatives in a single fiscal year. Reflecting the volume of work that is truly possible by innovative firms. Might I say that the oil and gas industry needs to up its performance in a manner similar to what Cisco has achieved. 

@ 29:00 Chambers begins to talk about the way that he works today. He blogs. And that is how he communicates. Wikis are proliferating through the organization. And the majority of his meetings are held virtually through Cisco's use of their own "telepresence" products. I had previously wrote about these products here. Chamber's reflects on the dramatic impact Telepresence has made on his travel schedule compared to three years ago. 

To participate in building the types of systems that are needed for a highly productive future in the oil and gas industry. We need to build the software that identifies and supports the Joint Operating Committee in the manner that the Draft Specification describes. We can begin that by readers joining this community by following these instructions.

Towards the end of the video Chambers begins to sell the Cisco Telepresence product line.  I am one that certainly has drank the technological kool aid and include the value of face to face virtual meetings as a critical part of this software development project. But there is a larger point that I would be missing if I did not state the value of face to face virtual meetings of the representatives of the different producers sitting at the virtual Joint Operating Committee. If, in addition, these people were supported by the kinds of business tools that are discussed in the Draft Specification, then I think we can see how the industry could expand the number of initiatives it undertakes and the society as a whole be able to depend on the energy industry to fuel their imaginations of what is possible. 

Please, join me here.

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