Perez, The New Technologies Part I
Professor Carlota Perez recently republished a paper that was originally published in 1986. This paper was originally published only in Spanish, and was translated last year to English by Professor Perez herself. Reviewing this paper shows many of the ideas that started her down the road to where she is today. I found the paper to be timely and applicable to the work we are doing here at People, Ideas & Objects, entitled "The New Technologies: An Integrated View" The paper can be downloaded from here.
Lets begin our review with a concept Professor Perez picks up with her "Techno-Economic Paradigm as Common Sense." Using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer has that "common-sense" ring to it. Lets begin our review.
II. Techno-economic paradigm as “common sense” models in the productive sphere
Applying her common sense paradigm to the JOC, we find the definition of what she considers to be required to qualify as "common-sense".
In order for a technological revolution to spread from branch to branch and on a world scale, more than word about a new technical potential is required. Coherent diffusion demands a simple vehicle of propagation, accessible to millions of individual decision makers. I have suggested that the organizing principle of the selection and structuring mechanism of each paradigm can be found in an input—or set of inputs—capable of exercising a determining influence on the behavior of the relative cost structure. This would be the vector carrying the new paradigm into the common sense thinking of engineers and managers.
This input or “key factor”—as we shall call it—comes to play such a steering role by fulfilling the following conditions:
a) Its relative cost must be obviously low and with a clearly decreasing trend;
b) Supply must appear as unlimited, for all practical purposes, regardless of the growth in demand
c) Its potential for all-pervasiveness in production must be massive and obvious; and
d) It must be at the center of a system of technical and organizational innovations, clearly recognized as capable of changing the profile and reducing the costs of equipment, labor and products. pp. 9 - 10
b) Supply must appear as unlimited, for all practical purposes, regardless of the growth in demand
c) Its potential for all-pervasiveness in production must be massive and obvious; and
d) It must be at the center of a system of technical and organizational innovations, clearly recognized as capable of changing the profile and reducing the costs of equipment, labor and products. pp. 9 - 10
Clearly use of the Joint Operating Committee provides strong evidence of each of these requirements. Addressing each point on its merits it soon becomes "common-sense" to those within the industry.
A) Its relative costs must be obviously low and with a clearly decreasing trend;
Reviewing People, Ideas & Objects business model shows that the costs of development plus an element of profit provides significant cost reductions to what producers are paying the SAP "Juggernaut". Although industry wide total expenditures on ERP systems can not be defined, I would estimate them to be as high as one quarter of one percent of revenue, or up to $8.75 billion per year. Certainly we can effectively reduce these costs by developing the Draft Specification and the associated costs of the Community of Independent Service Providers.
This also needs to be put in the proper perspective with respect to the anticipated technical changes. Particularly those that are detailed in the People, Ideas & Objects Technical Vision. If these technological changes occur, what will the costs associated with the status-quo be? Will the costs remain as they are, escalate, or will the real costs be borne by a further erosion in the efficiency of the industry.
B) Supply must appear as unlimited, for all practical purposes, regardless of the growth in demand
The costs associated with increasing the number of users on the system is limited to the additional electricity consumed. These cost metrics continue throughout the life of the applications life cycle. Additional costs involved in changes, enhancements and innovations are allocated to the entire subscribing base of producers.
Moving the associated technological costs from the individual producers to the industry provides substantially cost savings benefits. The key benefit is that the producer firm is able to focus on developing their earth science and engineering capabilities and applying these in developing their physical assets and productive capacity.
C) Its potential for all-pervasiveness in production must be massive and obvious;
Oil and gas is a complex and difficult business. Without the requisite overall understanding of how the industry operates and the influence of the Joint Operating Committee, it is difficult to see the overall picture clearly. The JOC is used systemically the world over. Used to mitigate risk, JOC's are formed to manage the joint assets. And as the aerial extent of areas of operations and facilities grow, more producers with financial interests in those properties are added to the complex of ownership interests in oil and gas.
This is the origin of the JOC and it has been established as the legal, financial, operational decision making, cultural and communication frameworks of the industry. Moving the compliance and governance of the hierarchy to be in alignment with the five frameworks of the JOC provides an organizational common sense of what and how the producers operations will be conducted.
Its not that moving to the JOC as the key organizational construct will provide the potential for all pervasiveness in production as Professor Perez states as necessary. It's that the JOC is all pervasive in production.
D) It must be at the center of a system of technical and organizational innovations, clearly recognized as capable of changing the profile and reducing the costs of equipment, labor and products.
People, Ideas & Objects isn't about the technology. It's about the business and how it is organized. What is the most efficient way to continue forward is dependent on aligning the many frameworks of the Joint Operating Committee to the various compliance and governance frameworks of the current bureaucracy.
Adam Smith's division of labor and specialization determined long ago that all economic value is generated through progressively more efficient means of organization. As we discovered in the Preliminary Research Report, organizations are defined and supported by the software tools they use. To change the organization therefore requires that we build the software first. The bureaucracy is constrained and this fact is reflected in the current performance of the producers.
March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 21 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.
If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.
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