Note to Reader. I am publishing the "Plurality" document I frequently refer to in this blog. This will enable searching based on the text within the entire document. The word count is approximately 35,000 words and is provided as background for the discussions.
A number of technology changes have occured since it was originally published in 2004. IBM has chosen not to support this effort, and as a result I am replacing the components of the technology architecture as the opportunities and needs require. We are moving to the Sun strictly for their support of Java, and the synergies of the visions. As I recently noted, Ingress would be the database that we will use. Other then that, I have chosen to host the entire development and operating environment on Sun's Grid and as funds become available we will secure those resources.
References are to the literature noted in the bibliography. So here it is, warts and all. I hope you enjoy it, any and all comments are welcomed and appreciated.
Thank you
Paul Cox
In Dr. Daniel Yergin & Joseph Stanislaw’s (1998) book The Commanding Heights, the economic malaise that consumed most of the European countries in the period prior to WW2 was attributable to the capitalist’s comfort with the status quo.
This status quo, and a well-defined class system, particularly in Britain, enabled capitalists to reap the benefits of their companies’ economic activity without the need for further investment or, more importantly, innovation. Yergin et al (1998) attributed the decline of this economic malaise to the majority of the European countries moving toward economic reforms in the form of government nationalization, planning and control of the commanding heights of each countries core market requirements. This level of planning initially spurred the European economies and was widely believed to be the appropriate role and responsibility of governments. These theories were supported by John Maynard Keynes “Keynesian” economic theories and thinking, and the fact the centrally planned industrial complex of the Soviet Union appeared to be more prosperous than western-based systems.
This economic thinking coupled with market reforms in Europe led many countries to pursue various forms of communist, nationalist style governments and even in the United States, high levels of regulation. This Keynesian economic period began in the immediate post war period and continued into the late 1970’s and led to the fundamental reforms of the Reagan - Thatcher era. Based on Friedrich von Hayek’s economic theories, Reaganomics led to comprehensive market reforms adopted by Russia and China that now have the opportunity and economic structure to compete effectively in the global economy.
During the 1990’s we began to see capital flow into the more risk-oriented areas of the global economy. This risk orientation was at the expense of what was considered the “old economy” and resulted in a feverish over expenditure in speculative and corrupt business models. This precipitated large-scale global economic fallout. This fallout being symptomatic of the occurrences of what this paper will describe as a global manufacturing capacity overhang, which is cited by this author for the purposes of this paper, as the cause of the current global deflationary pressures. However, was this capital orientation to risk incorrect? Or, did this level of capital investment form the basis of a third “revolution” in business and economics comparable to Keynesianism and Reaganomics? The thinking from the Reagan-Thatcher era now presents new issues, and begs the question: does the new economic revolution, or globalism, present a new basis for companies competing on a global basis?
Over the past ten years we have seen a comparable revolution in thinking of all forms of international governments, western based or communist. This presents new competitive threats and opportunities for firms operating in this new global environment. Today companies need to make difficult choices.
Do today's companies atrophy under the guise of harvesting during the regular business cycle? And is history repeating itself by North America being challenged by a potential new global leader, just as the United States challenged Europe after WW2? Or, does management actively invest in their organizations on the basis of new competitive advantages and take the appropriate risks to enable their organizations to evolve and adapt in this rapid, change-oriented environment.
History reflects that in the period after WW2, companies involved in investing in market share and growth were rewarded with larger and more profitable organizations. This model of “growth” has become so systemic in most of western management’s thinking that it is easy to confuse an organization’s growth orientation with their purpose of maximizing shareholder return. (Enron and WorldCom.) With unending supplies of human resources in the Asian and Eastern European countries, this growth strategy only exacerbates deflation.
Capital deflation presents two unique and difficult issues, which include:
- Deflationary cycles are difficult to stop. Witness Japan’s difficulty through the 1990’s and currently.
- During deflationary cycles no one “wins”.
Consumers, companies and countries find their holdings in a never-ending spiral of decline in value, which is only contrasted by the never ending upward spiral of debt, and commitments valued at prior periods higher valuations. Capital deflation must be avoided at all costs. The never-ending economic decline can become permanently entrenched in the minds of consumers and make the situation only worse as time passes. Witness the approach of the Japanese to their economy. The government, acting on the response of their citizens, after 12 years of deflation and recession, has not implemented the necessary market reforms to deal with this deflationary economic phenomenon. The Japanese people are generally well off and continue to accept that they need not invoke any measures to deal with problems that are not evident to them.
A new means of international competitiveness needs to be adopted by all companies operating in the global economy. The standard operational strategy (growth) is now limiting, and possibly exposing major societies to economic decline. It is this researcher’s opinion that innovation is a key economic driver and operational strategy that can augment a firm’s other strategies for the future. Innovation is an operational strategy that augments the other operational strategies of marketing, operations, financial, and human resource. Focusing on innovation will lead North America to continue with its present influence and global position.
Some choices in this environment are simple to make, but for companies such as Air Canada, built on the thinking that consolidation of market share was the key to prosperity, change is difficult to consider, let alone implement. What basis of competitiveness can provide western economies with sustainable competitive advantages? How does a firm expand its capacity to innovate? What are the necessary tools and methodologies that enable a firm to augment their capability to ensure that their competitiveness continues to accelerate throughout their product life cycles? Is innovation capable of supporting the western economies in such a competitive environment? With Vietnam and China taking the most advanced telecommunications and other products of the West and employing them, their economic infrastructure are immediately competitive.
The risks of not changing to a new economic model in North America are significant. Will organizations be able to stay in business? Is innovation the competitive advantage for the future of our western economies? What can a firm do to augment their innovativeness, and is there a method of implementing the appropriate procedures and policies to become innovative? Or are we destined to rely on the competitive nature of the entrepreneurial methods of creative destruction?
What are the ethical dilemmas for a firm that chooses not to pursue an innovative path? With the inherent loss in value, standard of living and employment, the ethical dilemma is clear and should be articulated to the managers to ensure that these tools and methodologies are clearly understood and implemented.
Theoretical Basis of this Research.
Listed in descending order of importance to this paper, are the following theories:
The first is Dr. Giovanni Dosi’s theory and his 1988 article “Sources Procedures and Microeconomic effects of innovation”. Dr. Dosi’s article provides a critical level of thinking and introduces many tools necessary to implement innovation.
Secondly is Dr. Wanda Orlikowski’s Model of Structuration for Technology and Dr. Anthony Gidden’s theory of structuration, which states that society, organizations and people need to move in lock-step in order for successful advancement to occur. Dr. Orlikowski’s model asserts that a fundamental component of society is technology, that technology provides a duality and therefore is a constraint or inhibitor to successful advancement of society, people and organizations. It is this paper’s hypothesis that the hierarchical organizational structure is an impediment to advancement of the oil and gas company and society in general.
Thirdly Dr. Michael E. Porter’s work in “On Competition” and “Competitive Strategy” and his strict application of competitive strategy. A further movement away from the focus on growth needs to be further emphasized and acted upon in oil and gas. Dr. Porter’s work has emphasized that growth is not a successful strategy since the late 1970’s, and the methods and tools that Dr. Porter has developed, which include the definition of clusters, provide a sound basis for reviewing critical components of an organization’s underlying strategy.
Fourth, Dr. John Seely Brown and John Hagel III recent and comprehensive work on implementation and management of Web Services technologies. Dr. Brown is the former Director of Xerox PARC and has written extensively with John Hagel on the risks, opportunities and threats of the Web Services paradigm.
Fifth is Dr. Noel Tichy’s management of strategic change and the definition of change agents. How leadership is a necessary component of change management. Where leaders engage and align the people within their organizations through technical, political and cultural dynamics.
Globalization requires companies to stop investing for market share and growth through increasing capacity; rather, innovation is the way to increase value for organizations, people and society. Emphasis on growth has lead to over capacity in all the western economies and now runs the risk of a protracted deflationary depression as witnessed in Japan over the past decade. Businesses must maintain their competitive offerings by innovating.
Implicit in this research project’s hypothesis is the capacity for the “old” system to provide growth is failing to increase shareholder value. This has presented a very precarious situation for large organizations in which errors in judgment, ethical behavior or market structures have the detrimental effect of being fatal to the health and independence of the organization. We have consistently seen large companies that have erred, and fail as a result. In a ruthless and unforgiving North American market, where do the companies move to mitigate or avoid these effects?
Of note: participants in the Japanese economy have not taken any risks, live in an environment where protection of companies mistakes is mitigated by government policies, and no innovation, failure or economic growth occurs. Conversely, why have Apple and 3M, companies built on innovation, fared better then their competitors? Apple has demonstrated resilience and has come back from near death experiences, and 3M has consistently outperformed others in value generation, on the basis of innovation, for decades.
One of the reasons cited for the former Soviet Union’s economic demise was the inability for the economic system (that propelled them to alleged greatness in the 40’s, 50’s, and 60’s) to accommodate change or innovation. Things were done because that was the way they were done. The lack of questioning and process inefficiencies continued until the system began to collapse upon itself. Are large organizations incapable of reforming and embracing innovation as a means of competitive survival? Enron lead the way with what was heralded as organizational innovation, only to be found criminal and eventually bankrupt. Since then the all time top three corporate bankruptcies have occurred in the United States and many CEO’s have been arrested and organizations shut down due to fraud and other inappropriate actions, a key example being the former accounting firm of Arthur Anderson. What is the cumulative effect of these occurrences, and are these parallel to the experience of the former Soviet Union?
During the past 15 years we have also seen a fundamental change and understanding in the individual’s role within organizations. The trust and commitment of people in their organizations has diminished through systemic and chronic downturns, layoffs, early retirements, pension revocations and brutal downsizing. The emergence of the superstar CEO and escalating pay scales for senior management has had the dual effect of recognizing the value of intellectual talent, and, further eroding the trust and commitment of the staff within those organizations. Today we see Disney, which was one of the greatest companies built on the basis of intellectual property, challenged by key employees and contractual relationships with suppliers and partners. Pixar Entertainment, Jeffrey Katzenberg and the Current CEO are collectively more profitable then the entire capital and intellectual property base of Disney. This dissection of value continues unabated, and essentially unidentified as a detrimental trend to the health of large organizations. Is this the beginning of the identification of this capital dissection, and the beginning of the legal remedies necessary to mitigate insidious devaluation of shareholder trust and value?
Microsoft faces it’s greatest challenge in the form of open source developed software. Independent, self-organizing teams working together, electronically, collaboratively, to build what they consider to be better software than that which is offered commercially.
Dr. Orlikowski’s model requires that the organization, society, technology, and people move in lock step with one another. Our society appears to have embraced market reforms on a global basis with outstanding success. Technology is being developed that could only be imagined a decade ago, and is readily available throughout the world. People are reaping the economic benefits of their increasing capabilities and monetary value. These benefits have placed enormous stress on the traditional organization with the ability for the organization to adjust appears limited.
Dr. Giddens states that failure occurs if the components get out of lock step with one another. It certainly appears likely to this author that it could be asserted today’s organizations are beginning to parallel the difficulties that the former Soviet Union experienced in its last decades. Does that mean companies must atrophy until the end is clearly presented to them, as is the case with Air Canada? The inability to innovate has stalled these organization’s growth, which was their overall purpose for existing.
Research Objectives
This researcher’s objective is to build an innovation model for Genesys Software Corporation (Genesys®) to use as a means to consult to organizations that desire to move away from the structural difficulties articulated above and become an innovative leader in their industry. Development of the innovation model will be based on the determination of key success factors and application of the success factors within the oil and gas industry. It is expected that this will be developed through a consulting role that is supported by producers.
What makes a company innovative? What tools, methods and procedures, implications for management, and leadership are available within an organization to define and implement innovation? Innovation is certainly a topical point in business conversations, everyone can clearly identify a new innovative idea or product, but how are these innovations initialized, developed, financed and created? Who can benefit from a consulting role that is specifically designed around a model for innovation? Where within an organization can innovation come from? How long can it take before the innovations begin to provide the expected returns, and what are the expected returns?
Key to the development of this innovation model will be an underlying reliance on project management’s role in the future of organizations. This author believes fundamentally in the ability to invoke change as fundamental as what is facing organizations today is a role best assumed by the project management methodology.
Research Questions.
- Can the scope and understanding of the process of innovation, be reduced to a quantifiable and replicable process?
- How are innovation leaders able to instill in their people the drive to attain the innovative needs of the organization?
- What role does leadership play in an innovative firm? What corporate, operational and marketing strategies and methods do leaders use to assert their leadership?
- Can the definition of innovation be expanded to include finance strategies, human resource strategies as well as products and processes and therefore be a critical component that compliments each operational strategy an organization employs?
- What role does information technology and information strategy play in the innovative firm? Collaboration is a key component for the future but is it an enabling technology for innovation within organizations? How can collaboration be implemented to facilitate the work required in implementing innovative procedures, thinking and capability?
Hypotheses.
Implicit in this research project’s hypothesis is the capacity for the “old” organizational system to provide growth is failing. The current oil and gas hierarchical structure is inappropriate for the future of internationally based, innovative organizations.
This research can facilitate and affect a trajectory change in organizational performance through the development of the SJOC and by introducing collaborative tools and systems to facilitate innovation in production, process and organizational capabilities.
Research approach
Summary of this descriptive research design and methodology
This research provides a base of understanding to assert that the method of competition for a large sector of the senior independent producers has changed. Where these independent producers are collectively contemplating the internationalization of their asset bases. Producers who need to consider a broader definition of what their competition consists of and consideration that they are now several of the largest of 100 oil and gas companies in the world. To compete in this new environment requires a different mindset of what their competition is and how to adopt a manner of cooperation and competition with other producers.
The selected methodology of research for this project’s approach is descriptive. Using a descriptive research approach provides a basis of research that is more speculative and tentative in nature, where the research questions and hypothesis are not necessarily based on causation and effect.
The purpose of this research is to determine the validity of the hypothesis that current oil and gas companies’ organizational structures are inappropriate for the future and lack the innovative capability of internationally based organizations. Employing Dr. Giddens and Dr. Orlikowski’s theory and model in this situation shows that the inappropriateness of current organizational structure is an impediment to societal and human developments. Technology, which forms the duality of societal structures, employed in the fashion of this research, will provide a tangible opportunity for producers to innovate and progress.
In February 2003 Genesys Software Corporation published a proposal for the oil and gas industry to consider a revised methodology of securing the Enterprise Resource Planning (ERP) style of software. This February proposal contained several innovative new methods for companies in “niche” markets to secure the ERP styles of software necessary for their future. Genesys®, February 2003 software development proposal is provided as an Appendix to this preliminary research report. This February 2003 proposal provides a unique value proposition for producers to consider.
Collaboration defined.
Consistent with a revised understanding of competitive forces, there is a need to better understand the attributes of collaboration. Dr. Dosi lays the fundamental groundwork for how industries need to deal with the types and methods of competing in an innovative manner. In this definition Dr. Dosi clearly raises the point that collaboration is key in raising a firm’s capability to straddle several business cycles and increase their long-term viability and competitiveness in a global environment.
Collaboration provides firms with the ability to achieve a collective learning. In the competitive environment of today where each company could be considered a competitive silo within an industry, errors and issues arise that are learned within each silo over and over again. The learning from these mistakes are not shared and therefore, based on a firm’s capability, incurred again and again by each silo.
Collaboration seeks to share the learning experience over a broader base. Whether internal or externally, this “sharing” attitude is inconsistent with the industries’ past and current culture. Hence, it may be a major impediment to their ability to move forward in the global competitive environment.
Research methodology.
How this organizational structural change can be orchestrated is through a relatively new development in a well-established technology. Lotus Notes has provided a collaborative environment for many companies that have effectively used the features of Notes beyond its email functionality. The change in Notes functionality was the upgrade to Lotus Notes 6 and release of Lotus Workplace in which users can be administered (a timely and costly task) remotely. The primary issue that Lotus Notes R6 and Lotus Workplace mitigate is the elimination of the need for the Lotus Notes style “big bang” approach to implementation. A company no longer needs to make the dedicated roll out of Lotus Notes on an enterprise wide level. Workplace moves the technical difficulties from the user and centralizes it to where it belongs. This facilitates the ease of having several individuals from each company “tied” together in a “sharing” style of technology, easily and affordably.
Some of the initial uses of Workplace for this research project are as follows. The following are considered basic components of Workplace and are available immediately. Please note that all communication and access is controlled through IBM’s extensive use of encryption keys and certificates.
1) Libraries of documents.
The Construction, Ownership and Operation Agreement, with associated mail ballots, Joint Venture agreements with associated AFE’s, lease documents and other agreements that have been counterpart executed by members of the joint operating committee. Of note Workplace can invoke what is referred to as a CVS (Concurrent Version System). These were developed originally for programmers to enable the use of one code base as the “library” of all versions of their software code. Control and updates of these documents can be made subject to user-defined criteria. For example, if an amendment to the CO&O was considered, this could be proposed, edited, approved and managed through Workplace. This would provide a means to review the current existing CO&O and the evolution of the agreement over time.
2) Discussion databases.
For anyone who is familiar with Lotus Notes and the use of databases in that application Workplace is precisely the same thing, however available through a browser, and hence from anywhere with https (secure internet connection). These discussions are unique in that they provide an asynchronous discussion of the issues. Many discussions may take significant time and are added to by the participants as the collective thinking advances. These discussions being asynchronous provides time for the user to think and consider other points of view and issues.
The other advantage is that these discussions are provided to all team members’ whether they contribute or not. This facilitates team learning and discussion, which is key to innovation, risk taking and sharing of costs. A noted by-product of these discussions is the direct documentation of the tacit knowledge of the staff and contributors, leading to the ability to capture and manage the knowledge of the organization.
The motivation to contribute to these discussions comes from the fact that the staffs thoughts, ideas and contributions are made explicit, noted by their peers and stamped with the time they were made. Recognizing the contributions of the specific staff member is a significant method of motivation.
3) Synchronous messaging with team members.
Lotus’ implementation of instant messaging has many advantages over their competition. Firstly, these discussions are logged and posted within the databases for all the other team members to review thereby cutting the time for team learning down. Secondly, communications are encrypted and secure and are not a port for viruses or security breaches.
What this facility could be used for is innumerable. The oil and gas industry has been built on several basic principles that require “joint ventures”. These are:
- The co-operative sharing of risk. Capital risk is shared systemically.
- Provincial environmental concerns of having too many gas plants.
- The areal extent of many of the producing fields.
As a result of these principles rarely does an oil and gas company participate in 100% ownership of both physical facilities and producing assets. This is systemic and culturally ingrained in the industry. Consistent with the cooperative management of these facilities is the Standard Joint Operating Committee, which is comprised of members from each producer with a monetary interest in a facility or property. The committee, consisting primarily of engineers, is responsible for many of the decisions regarding the management of the facility and producing assets. Budgets are established; programs are developed, agreed to and approved collectively.
Most companies are active and use the operating committee as a means of managing their interests but other companies may, due to a relatively small financial interest, or non-core area participate only in annual meetings. The range of participation runs the gamut of possibilities.
Consistent with the authority of the committee, there are a number of forms, legal and other documents that represent the committee’s legal, environmental and cultural requirements. Each form requires counter-part execution by the committee members duly authorized officers. A current issue with respect to the management of oil and gas organizations is that the committee is not charged with the financial performance of the property. This task is left to the remaining organization to attempt to finance, produce and operate these assets in a profitable manner. This financial responsibility, generally, does not fall within the scope of the operating committee. What would happen if the joint operating committee or SJOC participants were charged with the responsibilities of attaining increased volumes, better financial returns or any of the other measurement criteria that are traditionally the domain of the hierarchy? Where the hierarchy has no direct influence in the manner of operational control. This anomaly between the hierarchy and joint operating committee forms a dichotomy or contradiction that this research project will attempt to further identify and resolve.
It is therefore asked in this research, is the Operating Committee the basis of an Open Source style of organizational formation? Is it where like-minded groups meeting formally, informally, online, and in person to manage, in all aspects, the strategy, management and financial performance of a certain property? Should this be the basis of how the ownership, operation and construction of the oil and gas industry be organized? Is the addition of financial performance, accountability, full authority and responsibility at the operating committee a means to enhance a producer’s innovativeness? An accountability that would include the financial reporting, tax planning and other requirements of management traditionally managed by the hierarchy? Is this revised method of accountability consistent with the requirements in the Sarbanes Oxely (SOA) legislation or Canadian Institute of Chartered Accountants (CICA)? Will collaboration at the operating committee level facilitate the opportunity to innovate based on the criteria of Dr. Dosi’s as defined in this research project? Will collaboration at the operating committee align and instill the accountability, performance orientation, innovation, shared risk and provide the organizational structure for the future of the global oil and gas producer?
Key success factors of this research
Based on the technical and organizational changes that are being introduced, assessments will be made on how collaboration has affected team performance, innovation, leadership and accountability. These and other measures of performance will be the criteria used to define and determine the key success factors. Key to this research will be the outcomes of the analysis built on the primary theories introduced. Specifically, Dosi’s methods in determining how innovation is developed, Orlikowski’s structuration model and the interactions between human, organizational and societies with particular emphasis on technology’s role in structuring institutional properties and human agents. And finally, leadership based on Tichy’s methods and models of managing strategic change. Significant technical and organizational changes are being introduced to an informal team environment with specific responsibilities. The potential for increased team performance exists, however, how these changes are implemented, supported and instituted will be of particular importance towards measuring and assessing the current and future benefits.
In Orlikowski’s structuration model in addition to the duality of technology, where technology is a product of human interaction that in turn assumes structural properties, there is the concept of interpretative flexibility of technology, which asserts that institutional properties influence humans in their interaction with technology.
Dr. Tichy asserts that key to leadership is the role of teaching. Citing examples of how Navy Seals teach new recruits what it is that they know, for survival, as an example of the role a leader needs to assume. This point may be one of the critical underlying motivations behind the open software movement and its success. Where the collective good outweighs the harboring and control of information and knowledge. The leadership role in this research and in the operating committee will be critical to the success in that, just as in the examples of the Navy Seal and Open Source contributor, will the operating committee member be motivated on the basis of what the facility should and could be, and can that attitude be extrapolated across the producer population represented in the operating committee? Dr. Tichy’s book “Managing Strategic Change: Technical, Political and Cultural Dynamics”, will form much of the underlying base of understanding how to introduce the changes this research project presents.
This research reports delivery and implications.
This proposal’s method of research in innovation will be concentrated on the SJOC of those Genesys® clients that subscribe to this research project. The Workplace software facilities will be provided and prepared by Genesys Software Corporation. This research is being facilitated and monitored through Genesys Software Corporation and will form the basis of innovation.
Innovative tools and techniques are for the collective good of Genesys Software Corporation and supporting producers. Copies of all data will be held confidentially and made available, upon request, and review, to ensure the confidentiality. Producers subscribing and sponsoring this research will receive copies of the final report based on the following outline:
- Background and executive summary.
- Literature search results.
- The Genesys® Model of Strategic Innovation.
- Generic results of the research. The basis of results will be across at least three producers complete with specific analysis for each sponsoring producers organization.
- Managerial implication of this research.
- Next steps. Opportunities and issues from this research.
This research should be considered in conjunction with Genesys®, February 2003 ERP proposal and the issues identified therein. It is explicitly stated this research project should lead to the development of an ERP system based on the proposed organizational structure of this research and Genesys®, February 2003 proposal.
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