Baldwin Mirroring Hypothesis Part II

People, Ideas & Objects is about innovation in oil and gas. Energy has become substantially more difficult now that the easy-energy era has passed. Innovation in the Earth Science and Engineering disciplines is where the difficulty and value reside. How do we develop an organization that facilitates and supports these sciences and innovations. The Preliminary Research Report determined that the Joint Operating Committee (JOC) is the appropriate organizational construct to enable innovation. This implying a level of interdependence between producers represented in the JOC. 

Professor Wanda Orlikowski's Model of Technological Structuration was used in the Preliminary Research Report to determine that software defines the organization. To change the organization requires the software to be built first. Using Baldwin's Mirroring Hypothesis suggests that we will also need to develop an interdependent organization within People, Ideas & Objects to develop that software.

Scholars in a range of disciplines have argued that mirroring is either a necessary or highly desirable feature in the design of development projects, but empirical research shows that some projects deviate from strict mirroring, seemingly without harmful effects. In this paper, we formally define the mirroring hypothesis, describe its theoretical underpinnings and systematically review the empirical evidence for and against it. Our review includes 129 studies spanning three levels of organization: within a single firm, across firms, and open community-based development. Across these levels, the hypothesis was supported in 69% of the relevant cases, but not supported in 31%. It was most strongly supported within firms, less strongly across firms, and often violated in community-based development settings. p. 1

It is in the review of those 129 studies that our ability to see the Mirroring Hypothesis, or to be precise, the exception noted and developed in Professor Baldwins paper, is directly applicable to the work being done in People, Ideas & Objects. Therefore, in many ways, defining what and how the organization of users, developers and members of the Community of Independent Service Providers will operate to build this software.

The exceptions in turn were of two types: In four cases, closely collaborating teams within single firms created modular systems comprised of independent components. More surprisingly, in 28 cases, independent and dispersed contributors made highly interdependent contributions to the design of a single technical system (or sub-system). Based on a detailed analysis of the latter 28, we introduce the concept of actionable transparency as a means of achieving coordination without mirroring. Contributors achieve actionable transparency by embedding their design in a centralized system with a shared design language and near-real-time updating, where everyone with an interest in improving the design has the right and the means to act on it. We present examples from practice and then describe the more complex organizational patterns that emerge in lieu of genuine mirroring when actionable transparency allows people to “break the mirror.” p. 1

The exception to the Mirroring Hypothesis is teams comprised of independent and dispersed individuals can provide the desired interdependency that we are seeking in the innovative oil and gas producer.

1 Introduction

The authors provide a definition of what innovation consists of. A definition of innovation that reflects what will be necessary in both the innovative oil and gas firm, and the innovative systems development communities of People, Ideas & Objects.

Innovation is a process in which people define problems and then actively develop new knowledge to solve those problems (Nonaka, 1994). p. 2

Building on this definition, what will be required to ensure that the dispersed and independent contributions of People, Ideas & Objects will enable the interdependence necessary in the software. Or as Baldwin suggests that we "break the mirror".

Responding to these gaps, this study makes two key contributions to the literature. First, it defines the mirroring hypothesis, explains its theoretical roots, and then systematically and critically reviews the empirical evidence pertaining to it. Second, it synthesizes observations from a large number of cases that violate the hypothesis to explain when and how development organizations can “break the mirror.” pp. 2 - 3

and

By contrast, the second type of exception poses a deeper theoretical challenge. In traditional development organizations, people have relied on spontaneous face-to-face communication, physical collocation, and formal authority to coordinate highly interdependent design tasks. The paradigmatic form of organization for developing an interdependent design is a highly interactive team, working in close proximity, employed by a single firm (Allen, 1977; Clark and Fujimoto, 1991; Sanchez and Mahoney, 1996; Chesbrough and Teece, 1996; Baldwin and Clark, 2000). However, the large number of counter-examples revealed by our study immediately raises the question, how are interdependent design decisions and tasks coordinated in the absence of face-to-face communication, physical collocation, and formal authority? pp. 3 - 4

If we go back to our review of Professor Baldwin and von Hipple's paper in late 2009 and early 2010, "Modelling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation". This paper compared various forms of innovation by producers, innovation by individual users and  open collaborative innovations. We learned that user contributions were freely given when the user understood and contributed to a design when they would receive greater value from the design then what they contributed. People, Ideas & Objects maintains the identity of users are "hidden" from the bureaucracies who do not want this project proceeding. And lastly the tools, policies and procedures of making contributions to People, Ideas & Objects maintain what the authors call "common ground". These are the components that will make the project successful.

To answer this question, in Section 5, we take a closer look at the twenty-eight exceptional cases in which independent contributors developed highly interdependent designs. We find that in all such cases (1) the contributors had compatible motivations and no severe conflicts of interest with respect to the ultimate use of the design; (2) the contributors worked in or created a framework that gave them expectations of good faith and some protection from harmful actions by other contributors; and (3) most importantly, the contributors maintained a significant shared understanding or “common ground” with respect to the design (Clark, 1996; Srikanth and Puranam, 2007). Common ground was sometimes created using analogues of traditional coordination mechanisms—e.g., electronic communication, temporary collocation, and informal, status-based authority. But we also find that independent contributors often coordinated their efforts implicitly by using development tools that made the design-in-progress both transparent to and actionable by all members of the group. p. 4

Yesterday in Part I of our review of this paper we documented the concept developed by the authors of Actionable Transparency. Actionable Transparency is the necessary ingredient to dispersed and independent developers to maintain high levels of innovative development. This ingredient is therefore not only desirable for People, Ideas & Objects, but also the innovative oil and gas producers.

The concept of actionable transparency is the main theoretical contribution of this paper and the focus of Section 6. As we define it, actionable transparency captures the extent to which everyone with an interest in improving a given design has the right and the means to act on it, i.e., to change it and see what effects the changes have. p. 4

and

In effect, anyone with access to the archives can “see” what’s going on without needing direct input or assistance from others. Actionable transparency requires not just that people can access and make sense of the archives and source materials, but also that they can contribute to the evolving design. p. 4

As the authors have noted "Actionable Transparency" has broken the mirror. Although the independent contributions develop an interdependent system. The breaking of the mirror would indicate that an innovative oil and gas producer would not be supported by these types of activities. Here the authors note that genuine mirroring is not achieved, but something more desirable, valid and valuable.

In the presence of actionable transparency, it is common for more complex relationships between system design and organizational structure to emerge in lieu of genuine mirroring. p. 4

In summary, based on three recent papers that we reviewed. [Orlikowski's paper and Structurational Model of Technology, Professor Baldwin's and von Hipple, and this paper] we are able to conclude the methods and means that People, Ideas & Objects software development methodology will successfully develop the modular Draft Specification. Which in turn will enable and support the innovative oil and gas producer to employ the interdependence inherent in the JOC. 

From this study, managers may conclude that mirroring is a common and effective way to achieve coordination, but it is not the only way. In the presence of compatible motivations and frameworks supporting expectations of good faith, there are new ways of building common ground, based on digitized designs, electronic archives, automated test suites, and instantaneous transmission of text, data and pictures. These alternative means, which support what we have called actionable transparency, can be used as complements or substitutes for mirrored forms of organization. Managers of development organizations within and across firms and in open collaborative groups, who choose or are required by circumstances to “break the mirror,” should be aware of these alternative means of achieving coordination. p. 33

and

We have shown that while mirroring is common in practice, it is not universal. Independent, dispersed individuals and firms can successfully collaborate on highly interdependent tasks if they have compatible motivations and expectations of good faith and can maintain a shared understanding of the evolving design. Actionable transparency can sustain an ongoing shared understanding of a design amongst far-flung contributors, thus is an important means of collaboration in the digital age. p. 34

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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Baldwin Mirroring Hypothesis Part I

A new working paper has been released by Professor Carliss Baldwin and Lyra Colfer. This paper "The Mirroring Hypothesis: Theory, Evidence and Exceptions" is something that we should have written about before, however time is an issue. What is interesting about this paper is that it is Professor Baldwin's co-author, Lyra Colfer's Doctoral Dissertation. Her Dissertation has been abbreviated into one paper that provides substantial evidence that the methods being used in the development of People, Ideas & Objects software applications. Are not just valid, but also valid for the oil and gas industry at large.

In Part I of our review of this paper, I want to introduce the hypothesis, discuss the authors definition of Open Collaboration and note how People, Ideas & Objects deviates from their definition. And lastly in this first part, talk at length about a concept called Actionable Transparency.

The authors define the mirroring hypothesis as;

The mirroring hypothesis asserts that the organizational patterns of a development project (e.g. communication links, geographic collocation, team and firm co-membership) will correspond to the technical patterns of dependency in the system under development. Thus the hypothesis predicts that developers with few or no organizational linkages will design independent system components, while developers with rich organizational linkages will co-design highly interdependent system components. (The hypothesis claims a correspondence between organizational structure and technical architecture, but allows causality to flow in either direction.) p. 1

Open collaboration as it is called in this paper is defined as:

In an open collaborative development project, product design information, such as software source code, is placed in the public domain. Independent entities including individuals and firms contribute voluntarily to the design, according to their own private needs and interests; they self-select their contributions without relying on managers or market prices to guide them (Raymond 1998, 2001; Benkler 2002; von Hippel and von Krogh, 2003; Weber 2004; Lakhani and von Hippel, 2009). The open collaborative literature extrapolates from these observations, and uses the mirroring hypothesis to predict the structural form of products created in these settings. p. 12

A clarification is necessary to reconcile People, Ideas & Objects differences to this definition. That is the source code is not placed in the public domain. The costs associated with development are too high to expect a volunteer group to be able to identify and build the necessary scope of an application of this size. Access to the code is made available, however, with the desired benefit that the direction the application takes is determined by the user groups based on their needs. I detailed the differences between People, Ideas & Objects and pure Open Source developments in a recent post.

This difference between the definition and our development do not preclude us from learning from this paper and applying its conclusion. On the contrary, I think that the difference between the theoretical and commercial world, in terms of the conclusion, is negligible, and its conclusion is precisely applicable.

6 Actionable Transparency

"Actionable Transparency" is a term that has been coined by Professor Carliss Baldwin. As we will see in Part II of our review, the authors determine that the situation that we fall within "break the mirror" and it is through the concept of Actionable Transparency that we find the results of this research interesting and applicable.

In The Age of the Smart Machine, Shoshana Zuboff (1988) observed that the increasingly information-based nature of industrial work has radically increased its “transparency.” She argued that, when auto-generated archives constitute a near-perfect surrogate for the activities that generated them, access to those archives provides “universal transparency” into what others are doing (pp. 315, 356-361). In effect, anyone with access to the archives can “see” what’s going on without the benefit of direct input or assistance from others. p. 28

Google would certainly subscribe to this theory. If everything is discoverable, then we certainly have a different approach to how we do things.

Material transparency denotes the mere disclosure of information. By comparison, conceptual transparency requires not only that contributors can access the information, but also that they can make sense of it (cf. Wenger, 1990). Finally, actionable transparency requires not just that they can make sense of it, but also that they can act on it (cf. West and O’Mahony, 2008). p. 28

We come to a problem in the development of the People, Ideas & Objects systems that the needs of one user can not necessarily be met through a generic design. I would assert that we are not seeking a generic design, but one that deals with the unique nature of the oil and gas industry as represented in the Joint Operating Committee. How this comes about is unknown, however, lets accept that we can have a multitude of different opportunities and options available to users of the system. If we make the assumption that it is possible, I think we can see in these authors work that Actionable Transparency is the solution.

Material and conceptual transparency do not imply actionability, however. Just because a potential designer understands a design doesn’t mean she can act on it. However, if she has the right and means to customize her own private copy of the design, then she has more room for action. The ideal form of actionable transparency goes even further: the designer can combine her changes with a host of others’, in near real-time, while at the same time guarding against design conflicts and catastrophes. Thus the concept of actionable transparency captures the extent to which everyone with an interest in improving the design has the right and means to act on both their own copy and the master copy of the design. pp. 28 - 29

The concept is well captured in the conceptual form of Open Source code improvements in People, Ideas & Objects. The issue of scope and scale are addressed through the ownership of the intellectual property and the means to fund these developments. Otherwise I see no difference.

What does actionable transparency achieve that conceptual transparency cannot? As indicated at the beginning of the paper, design is a process in which people define problems and then draw on their stores of knowledge and generate new knowledge to solve those problems (Simon, 1981; Alexander, 1964). Much design-relevant knowledge is tacit and initially inaccurate (Nonaka, 1994), consisting of conjectures of the form: “if I change the design this way, these things will happen.” “This way” and “these things” are generally tacit hunches, which are not well-articulated even in the mind of the designer (Bucciarelli, 1994). Yet if a conceptually transparent design is also actionable, conjectures of this type can be tested, evaluated, and new conjectures generated quickly and efficiently. There is no need to make the conjecture comprehensible to another person. There is no need to persuade someone else that a new idea is worth trying, risking failure and embarrassment. Interactions between the designer and the design (embedded in a system of archives and test suites, etc.) are all that is needed to generate a new trial and new knowledge. p. 29

In the Preliminary Research Report Professor Giovanni Dosi's work showed that innovation was messy. Many failures and wrong approaches would be taken, that it is this process of failure that helps to define the successful approaches.

Moreover, if a technical system is actionably transparent to several or many designers, experiments can go on in parallel and concurrently across many designers, who can then learn about and use each other’s changes via the system itself. (See Lakhani and von Hippel, 2009 on “optimistic concurrency” in open-source development.) This form of concurrent, recombinant experimentation creates a very rapid and powerful “generator-test” cycle. Such cycles, sometimes called “variation-selection -retention” cycles, lie at the core of all Darwinian evolutionary processes, including those found in theories of organizational change and evolutionary economics (Campbell, 1969; Simon, 1981, pp.128-130; Nelson and Winter, 1982; Anderson and Tushman, 1990; Tushman and Rosenkopf, 1992; Nelson, 1995). Thus actionable transparency can speed up the processes of design evolution, thereby increasing the rates of innovation and improvement for the system as a whole. p. 29

It is necessary to state how the unique way in which the intellectual property of People, Ideas & Objects enables "Actionable Transparency". I as author of the original Preliminary Research Report, this blog and other writings earned the copyright to the ideas that are expressed. Users, the Community of Independent Service Providers and others are monetarily compensated for their contributions. In essence I am purchasing the ideas that are generated based on the original ideas expressed in the research and blog. The aggregate copyright of all of the ideas is then licensed to the users and members of the CISP's, developers and others, such that this type of interaction, experimentation and development is possible and I would suggest encouraged. I in turn use the copyright to generate the funding from the producers.

The cost of coordinating an organization or team is sometimes equated with its communication complexity, that is, the number of messages that must be passed between members in the course of getting the work done (Brooks, 1975). Mirroring and actionable transparency in a shared system have very different implications for communication complexity. Given a team of n agents working on a fully interdependent design, the cost of coordination via mirroring is n2  n. For the same number of agents and design structure, the cost of coordination via actionable transparency falls to 2n: each agent only needs to manage his or her information exchanges with the system. p. 31

What is the effect of this conceptual model?

In the presence of actionable transparency, it is common for more complex organizational patterns to emerge in lieu of genuine mirroring. We describe these patterns below. p. 31

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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Google Sites announced.

A few weeks ago I promised an update on the activities of this project. The most recent news is the announcement of the new application “Google Sites” for Google Apps. I have been waiting for two key technologies from Google, Google Sites and the elusive G: Drive. Seems we will have to wait a little longer for the G: Drive. The reason I have wanted these technologies is to provide the complete environment I think our Users need. With 25GB of email storage for each User and Developer, and now a 10GB Sites database we have everything we need to start expanding on the eleven-module technical specifications and prepare to start developing these applications. Google Sites has a clean interface that provides the complex tools that our users will need.

What Sites will provide is a forum for the Users and Developers to collaborate on the “what” and “how” of what they need from this application. It will be the Users & Developers who will move the thinking forward, and steer the direction of this project on a day-to-day basis. People wanting to join this project should do the following:

• Review the archives of the innovation in oil and gas blog.
• Gain an understanding of how the system will be different and the impact of using the Joint Operating Committee as the key organizational construct. Focus on the various research areas that have been reviewed to date. How the boundaries of the firm lend themselves to the clear definition of the JOC being the market, and the role the firm takes in this new definition.
• Review and sign the license governing your contributions to the project. (Email me for a copy of the license.)
• Post a summary of your experience and what you can, and would like to, contribute to the project. These will be put in a Sites database where like-minded Users and Developers will be able to search and discover one another. (Up to 2,500 words.)

It will be at this point you will receive access to the community and collaborative environment. Issuance of your first.lastname@people-ideas-objects.com email and Sites account will give you access to all these tools.

The Draft Petroleum Lease Marketplace Module Specification is nearly done. A few more weeks and I should be able to post it. It is becoming clear to me that the Draft Partnership Accounting Module and Draft Accounting Voucher will be the third and fourth specifications to be published. It is very important to remember that these specifications are draft and only represent the “what” and “how” the overall vision of this application and its module operate. These are guideposts for the Users and Developers to work with to expand them where necessary and make them work for them in doing their jobs.

Recall the overall objective is to ensure that this application provides the energy producer with the most efficient basis in which to operate its oil and gas assets. And that will include the Users who are involved in this project reselling their time and energy to the producers that use the application.

The energy industry is very much a global business. Rarely do you have a producer that has contained all of its operations in one reporting jurisdiction. The Joint Operating Committee is the global - financial, legal, operational decision-making and cultural means of the industry. Recognizing the JOC as the key organizational construct denotes that the People, Ideas & Objects application and modules will have a global scope of operations. Limiting the geographical scope of the application makes little sense.

Financial resources from the producers continue to disappoint. However we cannot wait for the inevitable day that they realize they need to be involved in this development project. I will continue to solicit producers for financial assistance and participation. Recall most of the money will be used to compensate the Users and Developers for their time during development.
I have added three new module specifications to the application. The three modules are:

• Accounting Voucher Module
• Analytics & Statistics Module
• Performance Evaluation Module

The Accounting Voucher Module is simply recognition that the Accounting Voucher as conceived in this system is a module onto itself.

The Analytics & Statistics Module provides an interface to the application that enables the User to set criteria and establish ad-hoc reporting of items they are interested in. It will enable the deep analytical view of the data and information that they have access to. It's perspective will be from the firm where management can analyze one or many JOC's they participate in.

The Performance Evaluation Module provides the JOC a tool that will enable the participating producers with a means to evaluate the property for a variety of generic criteria. Key to the tools use will be the ability to create differing scenario's and the impact they would have on the property.

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A Variety of Upgrades

Some very good news, we now have a "presence" in the three main cities that I see this software development application appealing to. Calgary, Aberdeen Scotland, and Houston in Texas.

To contact me call;

• Calgary 403-467-7971
• Aberdeen 44-122-467-6304
• Houston 713-965-6720

We also have a new domain name and it is "www.people-ideas-objects.com". This will be the domain that is used by all of the users of this proposed application. The "front end" of the application will be "Google Apps" which provides each of our users with the basic collaborative environment. This environment will include 10GB of email, collaborative "Google Doc's and Spreadsheets", calendar, contacts, chat, voice, SSO (Single Sign On), home page and hosting of each users content for information, marketing or whatever they may need or want from a web page. (Think what Intellectual Property you have today, and may have tomorrow. And then consider how your intelectual property may augment your retirement income.)

As time passes and we complete the proposed software developments, users will be able to interact with other users of this application. Software developers and other people interacting in the markets and / or firms of the industry. Google provides us with this virtual environment, and then through the Google API (Application Programming Interface), users will interface to the modules I have described here, as well as, the transaction and processing or "back end" of this business application. A virtual environment that will be available anywhere and at anytime. Readers of this blog may find these software developments maturing around the same time most are collecting their gold watch! So get involved today!

I chose this domain name for a very particular reason. To have the potential users of this application begin to think how each of us in the industry will operate in the Peak Oil era. In the "old" economy it was believed that to expand you needed one of three basic building blocks. Capital, Transportation and / or Communication. University of Stanford Professor Paul Romer coined the following comments. (See also here). In summary he has restated the basic elements of the new economy are People, Ideas and Things. My twist on this is the fact that as object oriented software developers, (including those developers that may be working in the industry now), objects are our perspective. A small play on words but I think the potential users of this system should get some good ideas what their efforts may involve after 5:00 PM local time, or for that matter, anytime.

Some select quotes of Professor Romer's.

As one of the chief architects of "New Growth Theory," Paul Romer has had a massive and profound impact on modern economic thinking and policy making. New Growth Theory shows that economic growth doesn't arise just from adding more labor to more capital, but from new and better ideas expressed as technological progress. Along the way, it transforms economics from a "dismal science" that describes a world of scarcity and diminishing returns into a discipline that reveals a path toward constant improvement and unlimited potential. Ideas, in Romer's formulation, really do have consequences. Big ones.

and

reason (magazine): New Growth Theory divides the world into "ideas" and "things." What do you mean by that?

Romer: The paper that makes up the cup in the coffee shop is a thing. The insight that you could design small, medium, and large cups so that they all use the same size lid -- that's an idea. The critical difference is that only one person can use a given amount of paper. Ideas can be used by many people at the same time.

reason: What about human capital, the acquired skills and learned abilities that can increase productivity?

Romer: Human capital is comparable to a thing. You have skills as a writer, for example, and somebody -- reason -- can use those skills. That's not something that we can clone and replicate. The formula for an AIDS drug, that's something you could send over the Internet or put on paper, and then everybody in the world could have access to it.

This is a hard distinction for people to get used to, because there are so many tight interactions between human capital and ideas. For example, human capital is how we make ideas. It takes people, people's brains, inquisitive people, to go out and find ideas like new drugs for AIDS. Similarly, when we make human capital with kids in school, we use ideas like the Pythagorean theorem or the quadratic formula. So human capital makes ideas, and ideas help make human capital. But still, they're conceptually distinct.

reason: What do you see as the necessary preconditions for technological progress and economic growth?

Romer: One extremely important insight is that the process of technological discovery is supported by a unique set of institutions. Those are most productive when they're tightly coupled with the institutions of the market. The Soviet Union had very strong science in some fields, but it wasn't coupled with strong institutions in the market. The upshot was that the benefits of discovery were very limited for people living there. The wonder of the United States is that we've created institutions of science and institutions of the market. They're very different, but together they've generated fantastic benefits.

When we speak of institutions, economists mean more than just organizations. We mean conventions, even rules, about how things are done. The understanding which most sharply distinguishes science from the market has to do with property rights. In the market, the fundamental institution is the notion of private ownership, that an individual owns a piece of land or a body of water or a barrel of oil and that individual has almost unlimited scope to decide how that resource should be used.

In science we have a very different ethic. When somebody discovers something like the quadratic formula or the Pythagorean theorem, the convention in science is that he can't control that idea. He has to give it away. He publishes it. What's rewarded in science is dissemination of ideas. And the way we reward it is we give the most prestige and respect to those people who first publish an idea.

And lastly I have been working on a wiki that will be available to those that have registered as users of this collaborative environment. This wiki will codify much of what has been stated here in this blog, but in a more coherent format. The construction of this wiki should be completed by November 2007, and lastly if you find these ideas of interest do not hesitate to call, or preferably email me.

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