This little piggie built a house of straw.

Canadian Natural Resources Ltd (CNQ) have finally announced their earnings, or should I say losses. These were originally schedule for Monday this week, and for some reason they moved them to today. Hmm.

From a management point of view this company performed exceptionally. For just the second quarter of 2008 they recorded an additional $459 million in stock based compensation. We should all toast CNRL for their audacity and guts in providing these quarterly reports.

From a company point of view there is a lot to be concerned about. Not only is the management out to lunch with respect to lining their pockets. They insist on proving to the world that they have no idea what business they are in. The hedging got a little hairy, and as such they had to record a $2.369 billion charge for "risk management activities". I think they should call it "activities of a risky management".

Over the last 12 months the firm has realized a decline in production of 41,024 barrels of oil equivalent. Oddly enough I don't think this was the reason that management awarded themselves.

This company has stepped on the proverbial land mine and are about to be slaughtered like a pig. In this day and age with the credit crunch beginning to affect the general economy. This management took it upon themselves to bury themselves with debt. Just like a pig in a mud pit. I would say this firm is on red alert to try and save itself from the receivers.

How in the world could a firm run themselves into a negative working capital position of $3.1280 billion. Simply by going into a lot of debt. $26.260 billion total debt is enough to collapse the firm just from the juggling necessary to keep that much revolving.

The over reaching and bad management have come to the point where serious action should be taken. The stocks activities this past week will certainly have the Securities and Exchange Commission sending over some Wells Notices. So I'll leave it to SEC Chairman Christopher Cox, no relation, to do the heavy lifting on this one.

Oh and by the way the firm only lost $347 million for the second quarter of 2008. So the shareholders will have to be happy with that. After all what can they do about it? If you know of an investor or employee of CNRL give them a kindly email of this blog post so that they can donate to this worthy cause, and join me here.

Technorati Tags: People's Management Failure

Marshall Carter on MIT Video

A new video worth watching from MIT has Marshall Carter, Chairman, Board of Directors, New York Stock Exchange Group, and Director, NYSE conducting a case study in the changes he implemented.

Before I get into this video I want to communicate the process this software development project is taking.

• May 2004, Publication noting the Joint Operating Committee was the legal, financial, operation decision making and cultural framework of the oil and gas industry. And was the means in which the oil and gas industry would become innovative.
• May 2004 to December 2007, research into the validity and requirements of a system to support the innovative oil and gas producer.
• December 2007 to July 2008 Publication of the Draft Specification.
• July 2008 Determine the current management, systems and leadership are failing societies demands for energy.
• August 2008 Define and develop sources of revenue. Commence development (defined below)

Marshall Carter in setting out his case asks the following questions. I have answered these same questions from this software development projects point of view.

1) How do we know when to change?

There has to be a wide consensus that now is the time to change the current management and systems within the oil and gas industry.

2) How do we know when to launch our new strategic direction?

When the problem is evident to every energy consumer and every energy investor that the current course is a dead end.

3) How did we do it.

In a few years we may be able to answer this. I would suppose that the timetable above adds some clarity as to what has been done and where we are going.

4) How did we convince employees.

Most of the users and developers are sourced from the energy companies themselves. This is necessary as they are the ones that know and operate the business. They are also aware of the current situation and direction at the oil and gas company is futile and may not survive the disruptive changes that the industry will be going through.

5) How much effort would be needed to ensure the changes stick.

I believe that the Draft Specification answers many of the questions of what fits where. It also answers many of the problems that are systemic in the industry today. This system is the most logical means for a producer to operate. Therefore the natural tendency of users is to default towards the Draft Specification.

Marshall Carter then states that it was necessary to "build a vision from the bottom up". If anything, I think the hostility that management has shown to this project, and the hostility that I have been able to return prove this is not a "top down solution".

Carter also states "show those that resist change, that change is irresistible." I think forward progress of this software development project will soon prove to the management their way is dying. The following eight items are what Carter suggests is necessary for leading successful change. My response to each point is provided.

Leading Successful Change

• Sense of Urgency

There is no greater sense of urgency then the one that the energy consumer currently faces.

• Guiding Coalition

The use within this project to use the collaborative tools and methods to make this project a result of the users and developers who work within oil and gas. What has not been expressed before is an appeal that I think resonates with the users. Users have ideas on how to make things better. They don't have access to change the Information Technologies that they are required to use. This software development project enables them with a software development capability, source of revenue and chance to affect change within their area of work.

• Vision & Strategy

A vision and strategy that is grounded in the research and academic thinking. A strategy and vision that captures the possibilities of the Information Technologies available to users today.

• Communicating the Change Vision

Blogs and Knol's are powerful tools for reaching out to like minded groups.

• Empowering Broad based action.

This is more of a personal decision for the users and developers to make. No company or manager needs to approve their participation here. People with Ideas and who need software Objects to help them do them their jobs.

• Short Term Wins.

We can move to provide the short list of development targets (listed below) within a reasonable period of time.

• Consolidate Gains and Provide More Change.

The development targets should enable the community to move further and faster then they ever believed they could.

• Anchoring new approaches in the culture.

Using the Joint Operating Committee is enabling the use of the culture of the industry. If this is a requirement of successful change, what does that say about this software development project?

Marshal Carter towards the end notes that what gets measured gets done. So I want to set out these short term targets for the community.

• Establish a user based definition of security and access control requirements.

• Establish "User Archetypes" that implement the Military Command & Control Metaphor.

• Develop and test the Security & Access Control module using Sun's Federated Identity and Project Hydrazine.
• Go live with the users of this systems as soon as possible. Iteratively improve the products user interface, performance and security to meet and exceed user based standards.
• Resell the security offering under license to other industries.
• User based Wiki development towards final specifications.

Lastly Carter notes "Engineering systems at this point is a thinking [and building] process which allows you to identify and solve problems". So lets get to work. Find people to donate and participate in this project, and join me here.

Technorati Tags: People's MIT Video Organizational Change

That's 3.7 million man years per day, lost.

In the book "Profit from the Peak" it was noted that each barrel of oil is leveraged to 18,000 man hours of equivalent labor. This is intuitively logical to most energy consumers. Based on Friday's New York Times, the one year 600,000 barrel per day production loss by the International Oil Companies (IOC's) translates into almost 3.7 million man years of work / day. That is each and every day from now on.

It's time to make this software development project real. Quoting Professor Murray Rothbard’s (1985, p. 283) words:

“Entrepreneurial ideas without money are mere parlor games until the money is obtained and committed to the projects.”

It is therefore time to stop playing parlor games and get down to the job of building this software development project. If the loss of 3.7 million man years per day doesn't quantify the size of this problem nothing else will.

Therefore I am asking everyone and anyone who has access to a budget, investor, oil and gas firm, energy consumer or friend. And would like to donate towards developing this project. Please click on the newly installed PayPal button to make a donation to this worthwhile project. The service accepts all major credit cards and since I will be declaring these donations as revenue, you will be able to deduct the donation from your taxes.

Most of all, thank you, and join me here.

Technorati Tags: People's Call-to-Action

HBS Working Knowledge Forum on Stretch.

This forum is asking a critical question regarding the performance of firms and maybe more importantly, the performance of management. Click on the title of this entry to be taken to the forum. 

Can anything be achieved within a moment of time? Are quarterly and annual metrics obstructing what is possible? I know each day I struggle to move towards the goal of building the People, Ideas & Objects system. Each day I am frustrated by an inability to attain that objective. And each day I marvel at the progress we have been able to achieve in moving this software development project forward.

If I look at a moment in time, the moment that the May 2004 preliminary research report was published, as a fixed point in time. And I assume that it was a finding of substantial value for the oil and gas industry. Each day since I have risked the value of the idea by attempting to move it forward. What I have relied on is my education and experience to ensure that no risks would obstruct this community proceeding in the right direction.

As our speed increases and the challenges of blind bunny trails distract us from what is important. We must be aware of our risks to derail this train at all times. If we focus on the risks, then the train will derail for certain. No one individual, no one group will have that opportunity if we leave the future of this project in the hands of those that care the most, the users.

This post was motivated by an interesting offer from Professor James Hesketh of Harvard Business School. His offer is to debate these points in a forum until August 27, 2008.

Please, Join me here.

Technorati Tags: People's Harvard Ideas Management

Exxon, Shell, Apache...

The issue of declining production has struck the majority of producers in the oil and gas industry. The New York Times suggests total production declines may reach over 600,000 boe / day. Exxon, Shell and Apache, just as many others have reported, are showing a trend that supports the hypothesis of this blog's preliminary research report. That being;

• The corporate hierarchical organizational structure is an impediment to progress and most particularly innovation.

• Determine if the industry standard Joint Operating Committee, modified with today's information technologies, provides an oil and gas concern with the opportunity for advanced innovativeness.

Producers have also been spending record amounts on capital projects. Much of this increased funding is diluted by the costs associated with too-much-money chasing too-few-skills. Nonetheless producers are involved in a record number of projects. How often in life has doing more of the same; worked to mitigate fundamental changes in an industry?

Within the interpretation section of the preliminary report I suggested;

It is suggested in this research that the speed that a bureaucracy can adapt and change is inadequate for the operational demands of a future oil and gas operation. Innovation within the oil and gas industry will be required in order to keep up with the natural and increasing rate of decline in production. Where the sciences of geology and applied sciences of engineering, which cover a broad range, will need to progress substantially in the next 10 years in order to achieve the demand requirements of the North American energy consumers. p. 71

This claim of mine seems to have a tenuous hold on the legitimacy of me asserting my hypothesis is correct. What evidence is there that the dynamics of the underlying earth science and engineering disciplines have expanded to a higher level of understanding? A level of understanding that a bureaucracy, however large, is unable to comprehend or implement.

Possibly one of the most appropriate statements that has developed in 2008 is "the easy oil is gone". Captures the entire situation very well in my opinion. I'll be the first to agree that the contents of the preliminary research report were only extensions of my "sensing" that the demands of the business were accelerating beyond the bureaucracies capabilities. After 30 years in the business it was generally known that things were getting tougher, much tougher.

And not to discount the research that was done in the preliminary report. That of Professor Giovanni Dosi clearly defining what innovation is and what is necessary to be innovative. Or Professor Anthony Giddens Structuration Theory. A theory that suggests People, Society and Organizations move in lockstep, or failure will occur. I think we clearly see the current demands of society and people being ignored by organizations. Although no failure has occurred, one does not have to look too far. And Professor Wanda Orlikowski's Model of Structuration which suggests technology is a defining and reinforcing component of society. A model in which I coined the phrase "SAP is the bureaucracy".

The subsequent discovery of Professor Richard Langlois research on Transaction Cost Economics, The Boundaries of the Firm, and Market definitions. Dare I forget McKinsey Consulting's grounding of these theories in the current business environment. That the hypothesis and conclusions are based on this academic foundation prove that the Joint Operating Committee is the key organizational construct of the innovative oil and gas producer. At least that is what is proven on paper. As we know the ability to subject a field of study to a paper document provides proof of the concepts contained within the written word. People are still trying to test the theories of Albert Einstien's, theories that he published in the very early 1900's.

Professor Thomas Davenport has also contributed to this research. His blog (his feed ) is frequently highlighted for some of the current thinking he has in business today. In the preliminary report I quoted him from "Strategy and Structure of Firms in the Attention Economy" stating;

Strategy and structure are mental constructs, important not in themselves, but for their impact on people in the organization. Strategy and Structure are also the vehicles for focusing attention. p. 51

But what tangible proof is there that these hypothesis, conclusions, research and concepts are valid? I sarcastically suggest two alternatives;

1. We continue the debate of these "theories" with industry for another five years.
2. We begin building the systems based on these concepts.

I naturally conclude that point two is the choice I would recommend. Producers are being allocated the financial resources to fuel the innovation that commodity markets are demanding. Since these financial resource's are being distributed to managements pockets, I ask what's the risk?

Still not satisfied? I suggest that you select the "Call-to-Action" label of the blog to review the 45 posts that provide even more grounding for these theories validity. Or, review the Draft Specification for this software development and see how fundamentally different and capable the JOC is to enabling innovation in the oil and gas industry. I have also posted the Preliminary Research Report on Innovation Within Oil and Gas in three knol pages here, here and here.(Editing not complete.)

Lastly, please join me here.

Technorati Tags: People's Research Call-to-Action Plurality Strategy

Filthy Rich Clients

Sun Microsystems have released the "Preview SDK of JavaFX". This is Sun's response to the various development frameworks involved in web based user interfaces. Microsoft's Silverlight, Adobe Flash, and other rich media application frameworks. These frameworks are able to provide what is expected by users when they demand Rich Internet Applications. The best video on the site is SunEVP Rich Green demoing many of the capabilities of this addition to the Java language. (No Link)

JavaFX provides audio, video, 2D and 3D rendering on the Java Virtual Machine (JVM). JavaFX provides developers, designers and users with the ability to have the most visually rich interfaces to their applications. In my opinion this is one of the most important developments to the Java language. That is for a variety of reasons but for users of oil and gas ERP styled systems such as People, Ideas & Objects, rich media is critically important.

Just as no one would provide a green screen textual interface to a user today. The time has come for users to demand much more from their systems interface. More information about the actions that are happening of the users interest. What do I mean? Providing subtle hints in audio, visual and textual clues that certain actions are starting, running or completing. Maybe a user is in the Analytic & Statistics Module and wants to know when a complex algorithm is finished. The information is of critical importance to some urgent work been done by the user for an oil and gas producer. But the user also has over 50 other tasks that are overdue for other producers. The system should provide a subtle, but definitive, indication of when the users attention is required over the noise of the other 50 tasks.

Defining the need for this type of interface in the People, Ideas & Objects application modules is difficult to articulate. What I expect to see through the development of these systems is an iterative increase in the productivity of the oil and gas user. Quantum increases over the performance of today. If man can develop their mechanical leverage of one barrel of oil to offset the labor equivalent of 18,000 man hours. We should be able to achieve similar leverage metrics from an intellectual point of view. As much as computers have enabled our lives and increased the productivity of workers, I am certain that I would have concurrence that we have not attained anywhere close to the 18,000 fold increase in leverage that we should expect from computers.

JavaFX is an important component in implementing the systems interface to the level of these expectations.

Technorati Tags: People's Sun Java Development Architecture

I knew this was the right path.

Were traveling down a dark and unknown path in this software development project. Much of what has to be discovered and learned is determined by feel more then any blueprint or map. I think this project is 100% on target to be successful in making the oil and gas producer execute its plan's faster and more innovatively. Today we have some proof that we are in the right place and time to achieve the success we desire.

Some research was carried out on the Service Oriented Architecture (SOA) type of software delivery model. Click on the title of this entry to be taken to the research web page. This article suggests the odds are against us with only a 20% success rate in the SOA business model. It also provides a guide as to what we are doing correctly. And I think a clear understanding of where we need to move to in order to achieve the success that we are expecting.

What are we doing right;

Failed SOA projects get too focused on the means rather than the end. The failure to focus on business goals is a problem and focusing on them is the solution. There is sometimes a failure to ask the most basic questions in building the business case for SOA. Why should we be building services? What does it mean at the end of the day?... While one of the business drivers for SOA is reducing costs and achieving return on investment (ROI), ROI for SOA remains an elusive goal and SOA project leaders frequently take a leap of faith where ROI is concerned.

People, Ideas & Objects is about identifying and supporting the industry standard Joint Operating Committee (JOC). Aligning of its financial, legal, operational decision making and cultural frameworks with the compliance and governance framework. Compliance and governance being the sole domain of the bureaucracy, the separation of operational decision making and compliance and governance is a recipe for disaster. Nonetheless, the stated objective of this software development project is to enable;

"This community, using this software in their own service business offering, will be the method and means that the oil and gas producer will conduct its most profitable commercial operations."

This is not about the technology. It is not about project management. Although this project uses these two disciplines to achieve the stated objective. This is about getting the business of the oil and gas producer in alignment with the rapidly changing earth sciences and engineering disciplines. This alignment facilitates innovation and enables the oil and gas producer to keep pace with the changes in the underlying sciences.

and

1. Business and IT reorganization, usually with a new CIO coming on board
2. Sponsorship at the C-level or by the Board of Directors
3. Agile/iterative development methodologies put into place
4. Projects tied to and measured by business goals, not IT drivers
5. Well-defined funding and maintenance models that balance the needs of service providers and consumers
6. A simplified architecture, making it easier to access and manage quality data
7. A culture of trust between business and IT

Here we have a mixture of opportunities and problems. Item #'s 3, 4, and 6 are in place in my opinion. Item # 1, 2, 5, and 7 are hitting on the one area that has caused this project to struggle, money and trust. This may be a short term problem as the community involved in this software development continues its logarithmic growth in the U.S. I fundamentally mis-trust the companies I highlighted in my review of stock based compensation. These little piggies attempt to steal this project from me during September 2003 and April 2004 has left a bad taste in my mouth. As such I will not miss them. I however am willing to fully participate with the U.S. and British based industries and any other region that wishes to participate. We have much to do, and as you may have guessed, I have a driving passion for this project.

With that in mind I am frankly grateful for this next set of recommendations.

• Define the business cases clearly. If you can’t, don’t do SOA
• Empower those who need to drive the systemic change that SOA requires, typically, with the money and the authority to do something. Else, don’t bother. You need to control the money and be able to fire people if this is to work in a reasonable amount of time. Otherwise, you’re in endless meetings with people who have agendas that don’t include rebuilding the architecture for agility and reuse.
• Think long term and strategic, not short term and tactical. It’s okay; things won’t collapse as you move from a reactive to a proactive mode. Indeed, that’s how companies win their markets.
• Start small, but keep the momentum going. Small battles win the war, and little by little the architecture will get better if you just keep moving the ball forward

I have a fear of the issue that these points intimate. We don't need to follow any blind bunny trails and desperately need to keep the focus and tract of development in-line with the needs of the producers. However, we need the resources to build this project. If as I suggested a few weeks ago the scope of this project might be in the billion dollar range, over probably four years. The smooth application of the financial resources over the life of the project is the obligation of the collective group of project sponsors. This project needs to be managed on a basis that delivers the application with these constraints and difficulties in mind. This I will diligently work toward.

Which leads me to reiterate the value proposition of this software development project. The costs of development are allocated to the producers on a "per barrel of oil / day" basis. These costs are incurred plus a percentage of those costs for the project. The costs therefore are a small percentage of what the license costs of SAP or Oracle. Once the project is released in a commercial offering the costs of supporting and further developments will be handled on the same basis.

This article brings out another point that was assumed but never identified or communicated. The SOA model within an oil and gas company doesn't provide the value an industry focused SOA solution does. Does this mean an SOA denotes that it is an industry focused solution? I think it does and it seems this research indicates that conclusion may be valid.

Technorati Tags: People's Architecture Knowledge Learning Research

But can this project scale?

Many people look at a start-up such as this project and say, it'll never work, they can't scale. I look at the existing infrastructure of SAP and Oracle and say, it'll never work, too much code and too many customers. How's that for different points of view.

The constraints of organizations are quickly becoming the impediment to growth. That is by removing the constraints, growth will accelerate. Look at what has happened in the technology marketplace in the last ten years. Apple reacquainted itself with Steve Jobs and restarted the organization essentially from scratch. New designs, new processors, new operating system with 5 major upgrades, invented the iPod, iPhone and who knows what else exists in the man's mind. It's now 3 times the size of Dell.

Google has started as two PhD students with some fancy search algorithms. Ten years later they have built one of the most prolific cloud based product producers. And Microsoft continues to spawn vaporware in every product category as a means to sew Fear, Uncertainty and Doubt (FUD). The performance of the start-ups in the last ten years vs. the industry behemoths has created more value then the behemoths have lost.

Sun Microsystems have two projects Project Hydrazine and Project Caroline. There is a very informative (technical) podcast that you can listen to on Project Hydrazine here. These two projects provide People, Ideas & Objects with the ability to scale better then SAP and Oracle.

Lets look at the Draft Specification - Security & Access Control Module of the People, Ideas & Objects application. This module uses the Federated Identity products of Sun Microsystems. (I recommend you watch the four minute video with the perspective of a JOC in the forefront of your mind.) I take these tried and true applications and implement them in what I believe to be the greatest level of security and user friendliness. I do this development on Project Hydrazine and then deploy it their as well. Suddenly the users of this application have a state of the art Security & Access Control module capability. I provide the major accounting firms with the necessary access for compliance and boom, the job is done.

Well maybe not that easy, but far easier then the two ERP vendors I mentioned earlier. They have a lot invested in their code. They can't, and won't, throw that code where it belongs, even it is not up to the quality necessary for compliance. The reason they don't want to change is that it will take them the better part of this century to change the user base over to the better product. Constraints of code and customers for a software firm are the impediments of growth. I'm certainly pleased that I have neither code or customers at this point in time.

And that is the point. When I do commit to the code, it will have to be in such a fashion that I am not undertaking a huge infrastructure that needs to be built to support it. I hire Sun through Project Hydrazine to deploy the application and run it on their servers. I think they know a few things about that, and they sure are motivated to be the best.

So can this project scale? You tell me. And don't tell anyone but I feel like I'm cheating.

Technorati Tags: People's Sun Software Strategy Specification

The Draft Specification has moved.

I have moved the Draft Specification from the old wiki to two Knol pages. The Draft Specification is no longer accessible from the wiki. The first part is here and the second part is here. Knol makes it much easier to read and navigate.

Most of the text has been edited, Modules like the Security & Access Control are being rewritten and / or heavily edited so check back frequently for new information.

Technorati Tags: People's Specification

In a word, Whiplash.

U.S. Energy Secretary James R. Schlesinger (1977 - 1979) once stated that energy is framed by two emotions, complacency and fear. There is an air of complacency since the oil price has fallen over $20. How distant the problems of earlier this month seem. It almost makes sense to fill the tank again.

How much of this price change is the result of the inventory builds in the U.S. is unknown at this time. Over the past two weeks we have seen exceptionally large builds as it is rumored that U.S. consumption dropped substantially. The two weeks of inventory build was preceded by an unusually large draw down of inventories the week before. I hope this is a sign of the effect of higher prices on consumer demand, but I think we may also be in for a bit of a surprise.

In Supply Chain Management there is a phenomenon known as whiplash. It is an appropriate phrase as the analogy to whiplash is appropriate. You learn the intricacies of this phenomenon by conducting a simulation of a beer supply chain. The retailer, distributor, warehouse and brewery are each represented by four individuals. The objective is to keep the appropriate amount of beer in stock to satisfy your companies needs.

Starting off the game with minimal supply in each location you begin by passing information confidentially from one area of the chain to the immediate neighbors. What happens is as the supply demands fluctuate the effect on inventory begins to switch between the two extremes. One moment you have an excess, which reduces your next order, then you are faced with a draw down of inventory and the supply never recovers. The phenomenon once it is in the supply chain is very difficult to remove. The variance in inventory at all four locations are providing absolutely useless information.

If as I suspect, whiplash has entered the U.S. inventory of energy, then we may see the resumption of demand and a significant draw down in inventory. Leading to price increases and so on...

Technorati Tags: People's Market Data Failure