Perez, The New Technologies Part IV

Continuing on with our review of Professor Carlota Perez 1986 paper "The New Technologies: An Integrated View". I keep wondering what I would have thought of this paper if I had discovered it back when it was written. Clearly Professor Perez was well advanced in terms of her subject matter, but I'd be curious how this was initially received. The fact that it was not published in English until 2009 probably indicates it was a source of initial difficulty for the Professor.

If we look at the economy today, we see a pace of change that is refreshing in its ability to confront and confound the bureaucracy. Particularly in oil and gas, the management are flat-footed in their reaction to events. Going through the motions is the only reaction that management is able to muster. Pushing to optimize the inefficient and demand more from those that remain, these times are most certainly the beginning of the end, in my opinion.

In this post Professor Perez provides an understanding of what management will involve itself in this renewed economy.

A NEW MODEL FOR MANAGERIAL EFFICIENCY

In setting out what the role of management will fulfill in the new organization, Professor Perez provides a context of how the changes come about. Much of our experience in attempting to motivate the bureaucracy to fund this projects budget. Is really only the beginning of the difficulties that we should anticipate. Management does not share our concern for the markets demands for energy.

The diffusion of a new technological style is accompanied by a conflict-ridden trial and error process resulting in the construction of a new organizational model for the management of the firm. This process is extremely uneven and tends to spread by forced imitation under competitive pressures. The nature of the new model is shaped by the characteristics of the new technologies, in particular by those features most directly responsible for the quantum jump in productivity. In this section we shall explore some of the already visible elements of the new organizational model. p. 26

As each of this blog post is closed, the comment is made that we are committing to finding the right way to organize an oil and gas firm. It starts with the Joint Operating Committee (JOC), and we should not lose sight of the need to fully explore the potential of that organizational construct.

It should be noted that we are here treading much more uncertain terrain than in the techno-economic sphere. The final form taken by the organizational model at the level of the firm will be profoundly influenced by social and political factors. The general framework governing the eventual upswing will tend to favor some organizational forms to the detriment of others. p. 26

A. Systemation: The firm as an integrated network

It has been argued here before that management, due to a variety of reasons, have compromised corporate strategy across all divisions and properties. One of the advantages of using the Draft Specification is that each producer within a JOC can use their own unique strategy for the property. These strategies might be mutually exclusive to the other producers involved in the JOC. However, the strategy selected by the individual producer does not have to be a compromise strategy dictated as a result of too large a scope and scale of oil and gas company operations.

The typical organizational model of the previous paradigm was based on a clear separation between plant and economic management. Within each, the goal was to break down every activity into its component tasks, detecting repetitive routines which could be deskilled or mechanized. It was basically an analytic model, focusing on parts and elements of the process; it led to detailed definition of tasks, posts, departments, sections, divisions and responsibilities and resulted in complex hierarchies. The new paradigm is intrinsically synthetic. It shifts the focus towards links and systems of inter-relations for global techno-economic coordination. p. 27

People, Ideas & Objects proposes to provide the oil and gas industry with an ERP styled software development capability. This is not a static situation. The role of the Community of Independent Service Providers in developing new and better ideas and ways for people to interact around the JOC will never stop. This iterative loop between the software users, CISP and developers is an integral part of the new organizational model that Professor Perez suggests.

This term [Systemation as opposed to automation] has the advantage of shifting the accent away from mere hardware and emphasizing the systemic, feedback nature of the organizational “software”. We believe this to be an essential distinguishing feature between the new and the old model of firm organization. p. 27

and

Nor does it imply that they would constitute a single unit. If the old corporate structure managed multi-plant, multi-country operations, the new technological infrastructure would allow the efficient management of worldwide, giant, complex and rapidly changing conglomerate structures. p. 27

C. Centralization and decentralization

Just as a homogenized centralized strategy provides efficient centralized control, innovation, reserves, production and profits suffer. A decentralized strategy as suggested here will enable the innovations that increase the reserves, production and profits.

From what we have seen the new paradigm tends to favor both the very large and the very small. The same sorts of trends seem to appear when considering the optimal model of organizational control. To begin with, the hierarchical bureaucracies and economies of aggregation are radically questioned. The new ideal system is based on decentralized networks with local autonomy under central coordination. p. 28

And finally, rarely do we find the clarity of thought of where we are; as in this final quotation.

Bearing in mind the obvious limits to the analogy, it serves to make the organizational point quite clearly. A centralized decision-making system would have to be able to simulate every single possible combination of events with every single possible combination of elements and this is indeed a cumbersome and nearly impossible task. If organizations are to be diversified and flexible, to take full advantage of the new potential, they will probably tend to be based on flexible, interactive, relatively autonomous units, linked in adaptive on-line systems of coordination, under dynamic strategic management. p. 29

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

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Perez The New Technologies Part III

Our review to date of this critical 1986 paper "The New Technologies: An Integrated View" by Professor Carlota Perez has already produced two spectacular posts. The first post rooted in academia the thought that using the Joint Operating Committee is the common-sense approach. The second post detailed the matter-of-fact way that using the JOC will influence the productive and value generating capability of the industry.

This post provides support for the type of oil and gas operation and software development capabilities that will be successful in the near future. Moving away from the command and control nature of the bureaucracy to a dynamic industry is difficult to see at this point. Professor Perez helps us to detail the nature of this change.

IV. An exploration of the features of the new paradigm

From the previous discussion it should be clear that the effort we propose to undertake is not centered upon the electronics industry itself but in the trends generated in the whole of the economy by its development and the diffusion of its products. p. 18

We begin by examining the elements most closely related to the shift in the dynamics of relative costs; the impact this shift is likely to have on innovation trajectories and upon the mix of new products. Then, the new best practice production model, based on the characteristics of the new equipment, is analyzed. Finally, we try to identify the direction of change in the forms of organization and management of the firm. p. 18

NEW PARAMETERS FOR INNOVATION TRAJECTORIES

The importance of the oil and gas industry to society is accurately reflected in the calculation of 270 billion man days per day. Never before have we been so dependent on an industry for our very survival. The way that the industry proceeds from here needs to change. The bureaucracies are too slow and cumbersome to operate in this new dynamic world. The ability to explore and produce adequate volumes of energy is slipping behind the market's demand. This situation will continue of course, and the Information Technologies will enable the changes necessary for the industry to keep up to the demand for energy.

The central feature of the new paradigm is the trend towards increasing the information content of products, as opposed to energy or materials content. This is a direct consequence of the radical and continuing change in the relative cost structure towards ever cheaper information handling and transmission. For this phenomenon to introduce a bias in innovation, it is not necessary to assume that the costs of energy and materials will tend to increase constantly in absolute terms. It is enough to suppose that the diminishing cost and the growing potential of microelectronics will tend to widen the gap into the future. With this prospect, one can extrapolate forward the already observed new trends in product and process design. p. 18

And here Professor Perez eloquently details the characteristics inherent in People, Ideas & Objects and the Draft Specification.

Small is more beautiful and more profitable than big; versatile, compatible, adaptable, are better than rigid. A programmable product is better than a dedicated one. A product capable of modular growth is superior to one with defined and static scale and potential. A product with greater speed of operation and response is preferable to a slower one. Any product capable of joining a network or becoming the center or an element of a system is better than an isolated one. Distributed “intelligence” is more efficient than centralized control. p. 19

and

These vast opportunities for introducing innovations in an ever-growing spectrum of applications and in an ever wider range of activities, multiplied by the number of successive generations of each equipment, indicate that the evolutionary trajectories of these new technology systems will stretch a very long way into the future. These series of innovations widen even further the field of action for the software industry. p. 20

That is the role of People, Ideas & Objects. To organize the communities of people who work within the oil and gas industry.

These new technology systems are the most likely to drive global growth for the decades ahead. Thus it is reasonable to expect that the most powerful and largest firms will tend to locate and concentrate in the most dynamic core areas of these systems. p. 21

Participation by users in these core areas is available. These are user-based developments that support the communities involved in oil and gas. The core areas of these systems are forming and organizing around the ideas of using the Joint Operating Committee. 

Moreover, using similar equipment, small and medium plants can achieve an analogous flexibility and high efficiency. Thus, high levels of productivity are no longer so dependent on economies of scale. p. 23

This last quotation reflects the common-sense nature of using the Joint Operating Committee. It doesn't matter what size the producer that owns an interest in a property is. It could be Exxon or a local start-up. Financial ownership drives consensus at the participant level. The only area of concern or focus is the property that is associated with the JOC, and the strategy that each producer selects. Having a dynamic capability, as reflected in the Resource Marketplace module of the Draft Specification gives an equality to all the producers. This is also one of the documented benefits of using People, Ideas & Objects, the Financial Resource Marketplace permits ownership of any size of producer firm to participate in the JOC and not hinder the development of the property due to a lack of financial scale.

C. Technological dynamism: Design as an integral part of production

Over the past few hundred years. Man has used energy to leverage labor 45 fold. I believe it was around 1870 that labor from machines produced more then man. At what point in terms of leveraging our intellectual capabilities are we at today? What is holding us back from experiencing these types of benefits? Are the infrastructure to do so in place today? Or are we waiting for the bureaucracy to fund People, Ideas & Objects?

The coupling of computer-aided design and computer-aided manufacturing (CAD—CAM), together with expected increases in the productivity of software development, tend to diminish the relative cost of innovation and shorten the learning curves. This turns engineering design into a capital intensive activity and makes it an integral part of the production process with a crucial role in determining productivity and competitiveness. p. 24

D. Supply adapted to the shape of demand

In this next section Professor Perez identifies the nature of the bureaucracies view of the energy market. One in which demand adapted to the supply of oil and gas. Now the dynamic requires a different point of view. China, India and other developing nations have as much right, and possibly greater financial flexibility, to consume energy as the developed nations. Energy prices have responded, and they will continue to respond to this new reality.

Under the mass production paradigm, in which productivity and profitability depended on the growth of massive markets for identical products, pressure towards uniformity in consumption patterns was a condition of economic growth. In essence it was necessary for demand to adapt to the shape of supply. The new model tends to revert this relationship. pp. 25 - 26

This should be welcome news to the oil and gas producer! Greater demand and higher prices. The problem is that higher prices have helped the management of oil and gas keep maintain the status quo. Higher profits from higher prices have enabled the management to not only keep control longer then they should have, they have enabled the management to endow themselves with compensation schemes that make bankers look timid.

Maximum plant efficiency begins to be defined by its capacity to address the specificity of the particular market environment in which it operates. Thus, systems in use could tend to be infinitely diverse, covering even the narrowest niches and the furthest corners of the market and growing modularly at the rhythm of demand. p. 26

We need to act. The move towards the future that Professor Perez describes is to build the software. We are far too advanced a society just to leave it up to the market or some government agency. We need to act.

The vehicles for achieving all this diversity are the new branches of software and systems engineering. Their task could be understood as the last phase of production of the new capital goods (where their final purpose is defined). Their activities play a double role in the expansion of production under the new paradigm. On the one hand, they allow the multiplication of investment opportunities downstream by designing the systems to cover an infinite variety of new product and service markets. On the other hand, they foster the growth of the upstream demand for equipment, components, telecommunications services and other products of the motive branches. p. 26

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

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McKinsey Behavioral Strategy

McKinsey have published an interesting document that analyzes the ways and means that organizations make decisions. This is particularly relevant to the work at People, Ideas & Objects as we are first of all, asking the investment community to fund these developments, and secondly setting up how users will be able to build the systems that they want. Both requiring what McKinsey calls "bet the company" type of decisions.

The larger point that the document asks and suggests, is what are the best ways for companies to make decisions? Noting a series of biases that are part of behavioral psychology, McKinsey documents that process is the most important element in making decisions. No news here as People, Ideas & Objects is user based developments where the users, using only the Draft Specification, determine their best ways to proceed. The only other constraint that is placed upon the user community, and particularly the Community of Independent Service Providers, is that they fulfill the objective of provide the innovative producer with the most profitable means of oil and gas operations.

I would highly recommend to the user communities they read the McKinsey document. This is the type of value that can be added to People, Ideas & Objects, and hence the greater oil and gas community through user research into the best ways and means of proceeding with this important and quite exciting task.

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

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Perez, The New Technologies Part II

Yesterday's post started our comprehensive review of this 1986 paper "The New Technologies: An Integrated View". Professor Carlota Perez provided the tools for analysis that prove the common-sense nature of using the Joint Operating Committee (JOC). Today's post provides further proof of the times that we find ourselves in, and the context within this project. Specifically why there is so much conflict between the bureaucracy. Professor Perez states "A process of structural change in the economic sphere of the sort we have been describing cannot occur without conflict." A message that I would send to the directors of oil and gas companies, shareholders and investors. In this post we will detail the characteristics of this conflict, the scope of the opportunity and how this should be seen as the beginning of the rebuilding of the oil and gas industry. Where the innovative oil and gas producer provides significant investment opportunity and value generation.

III. Structural change and socio-institutional transformations.

To move to the JOC as the key organizational construct of the industry. Requires that we build the systems to support and identify the JOC. Moving the compliance and governance away from the hierarchy (the reason for the conflict) to alignment with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. This alignment, aided with the software development capability of People, Ideas & Objects, provides the producer firm to innovate off the rapidly advancing earth science and engineering disciplines. This common-sense approach to the oil and gas industry will provide substantial increases in performance. The evidence to that last claim is through the following analysis provided by Professor Perez.

Once the main guiding elements of a paradigm are established and the radical shift in the relative cost structure becomes clearly visible, the new ideal model grows in complexity and coherence, going far beyond mere technical change. In practice, it affects almost every aspect of the productive system. p. 14

I respond to each of Professor Perez' nine points individually.

a) New concepts for organizational efficiency at the plant level; p. 15

Clearly this is applicable as the Joint Operating Committee is the operational unit of all oil and gas. Not just locally but globally.

b) A new ideal model for the management and organization of the firm; p. 15

And as indicated, the source of the conflict. Management are not interested in giving up what they have worked to secure. They are in the driver seat and will be left at the back of the bus in this move to the JOC. That doesn't mean that management will not exist in the new systems. It will be different with a much more advanced skill set.

Organizationally we also see the changes in the producer firm. Focusing on the earth science and engineering capabilities of the firm and applying those to their asset base will be the key to value generation.

c) A significantly lower level of labor requirements per unit of output, with a different skill profile; p. 15

The previously mentioned different skill profile with management will similarly affect most workers within the industry. The lower level of labor requirement is a must-have in the future of the oil and gas industry. With the ever increasing volume of earth sciences and engineering involved in each barrel of oil, we will need substantially more effective labor inputs per barrel.

d) A strong bias towards the intensive use of the new key factor in technological innovation; p. 15

People, Ideas & Objects focuses on the business of oil and gas not the Information Technology. However, the IT provides the means for making the proposed changes. Without the IT the changes are not otherwise possible, and it's only through the recent maturation of IT that moving to the JOC is possible.

e) A new pattern of investment favoring sectors directly or indirectly related with the key factor and connected to the new infrastructural network, itself the object of a wave of investment; p. 15

I can see this happening. Professor Perez has always noted that financial capital has done its job. The current financial crisis is recognition that their job is done. Now is the work of production capital. The Draft Specifications Resource Marketplace Module provides for this type of activity. Where producers and suppliers work together to build the types of tools and services that are needed as a result of the expansion of the sciences. This "marketplace" module creates the market for the purposes described here.

f) A bias, therefore, also in the overall product mix, resulting from higher rates of growth in key factor related sectors; p. 15

If production capital has to choose between the innovative oil and gas producer, supported by People, Ideas & Objects software systems, and the bureaucracy...

g) A redefinition of optimal production scales leading to a redistribution of production between larger and smaller firms; p. 15

This has already begun. Those individuals that can team up with like minded people are able to establish significant production in very short periods of time. These teams have been discovered by the Shell's and Exxon's, and are finding a ready market for their skills. Within a short period of time, as little as five years in some cases, these innovative producers can sell the producer firm for several billions of dollars. If these small start-up producers had the innovative supporting software of People, Ideas & Objects available to them, it would be anticipated that the time frame would reduce, the International Oil Company could quickly take over the management of the property and the market demand for energy would be satisfied. I would anticipate that these "teams" would be able to generate larger production profiles in shorter periods of time with People, Ideas & Objects.

h) A new pattern of geographic location of investment as the new model redefines comparative advantages and disadvantages! p. 15

I'm surprised that this attribute is happening as well. The Preliminary Research Report was directed at the Canadian producers as its market for software development. I suggested in the report that if they didn't act, they would soon find the Calgary marketplace becoming a branch-plant of Houston. Unfortunately that is happening. Shell and other producers have moved their head offices out of Canada, and each day more decisions are made in Houston. This may also be a result of having two clusters of producers on one continent. Based on my statistics, either way, Canada, as a marketplace for People, Ideas & Objects, stands at a mere 3% of the U.S. marketplace and slightly behind South Korea.

i) New areas of concentration of the most powerful firms, replacing those prevailing in the previous paradigm. p. 15

I'm not sure, but this maybe the focus of the U.S. industry being the U.S. marketplace. If so then we can assume that the scope of the People, Ideas & Objects application modules will be defined by the users as the American producer focused on U.S. based production. And I'm good with that.

Professor Perez moves on to defining the effect of the financial crisis, and why it is human nature to have to go to such extremes of failure before we implement the necessary changes.

In the same manner, when a new techno-economic rationality propagates in the productive system, it becomes necessary to effect vast transformations in society as a whole to allow the deployment of its growth potential. p. 15

and

The crisis is truly a process of “creative destruction” but not only in the economy but also in the socio-institutional sphere. The new upswing can only be unleashed by means of vast socio-institutional innovations, in response to the requirements of the new paradigm and geared to facilitating the full transformation seething in the productive sphere. p. 16

Please note this "full transformation" whether that is with People, Ideas & Objects or another unknown system, will not occur without the software being built first. Spontaneous order as an economic phenomenon is questionable in today's society. Professor Perez states;

This process of social and political innovation is naturally long and full of conflicts. Nevertheless, production cannot be re-launched upon a lasting expansion path without re-establishing structural coherence, by arriving at a socio-institutional context capable of favoring the deployment of the new techno-economic potential. p. 17

And nothing along these lines will occur without the establishment of People, Ideas & Objects budget. We have much to do in terms of determining the right direction and processes.

Of course, the construction of a coherent socio-institutional framework, just as that of a techno-economic paradigm, is a gradual trial and error process, driven by the need to confront the various manifestations of the crisis and often hindered by the inertia of existing institutions and vested interests, associated with the old mode of growth. p. 17

With the petroleum industry responsible for offsetting 270 billion man days of physical labor each day, we have much to lose. I hope that we don't have to fully explore this crisis before we do something. And please remember none of the many years of development ahead of us will be easy. Clearly the bureaucracy will not act. And as Professor Perez suggests are too conflicted. Being part of People, Ideas & Objects is the beginning of how this process, the value generation of the oil and gas industry, starts.

This means that each crisis, each period of technological transition, is a point of indetermination in history. A quantum jump in potential productivity opens the way for a great increase in the generation of wealth. But the specific commodities that will compose that greater wealth and the way it will be distributed will depend on the socio-political framework arrived at. Historically, each transition has modified both the conditions of the various social groups within each country and the relative position of countries in the generation and distribution of world production. p. 17

Who will participate, and where is yet to be determined.

For each country, whatever the level of development reached in the previous wave, the need appears to make internal changes and to participate in the construction of a new world order. If the hypotheses presented here are a good approximation of the nature of the crisis and the means to overcome it, then, the best way to find criteria for a successful transition and make a leap in development prospects is a deep understanding of the new paradigm. This is possible because when the crisis becomes visible the paradigm has already diffused enough to be analyzed. pp. 17 - 18

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

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Perez, 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

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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27, 28, 29, 30...

Adding to the list of compelling reasons for People, Ideas & Objects.

# 27, I am an unreasonable man.

Referring to George Bernard Shaw's saying.

"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."

Therefore, for the energy industry to progress depends on the unreasonable man. And that's me, just ask anyone.

# 28, 270 Billion Man Days per Day.

If every barrel of oil has the capacity to offset 18,000 hours of manual labor, then we have a dependence on energy. How far a fully loaded semi-trailer can travel on one barrel of oil? (Answer is 252 miles) How much effort would it take to move that product (80,000 lbs) that distance without the benefit of energy. At least 18,000 man hours. In yesterday's post I detailed the specific nature of this threat.

We're fooling ourselves if we think we can get along without petroleum based energy. With the Chinese, India, Brazil and other countries joining the middle class, the demand for energy will be significant. We need to solve this problem and that is what People, Ideas & Objects is focused on providing.

# 29, Collaboration facilitated around one vendor.

People, Ideas & Objects provides the oil and gas producers with a focused software development capability. This capability is universally available to all producers who use the applications. Enabling a quality of collaborations and communications that are not otherwise available.

If for example, Exxon were to be providing the software services of People, Ideas & Objects, then many producers would be hesitant to use the application as it provides too much information to Exxon. In the same way, each producer having their own systems would disable the opportunity of having the open collaborations that are available only when everyone is using the same systems. That is to say that different applications have different languages, protocols and methods. Communications are constrained and limited unless there are 15 IT people available to support the collaborations. Having everyone on the same system provides a means to facilitate enhanced collaborations.

# 30, Users and the Community of Independent Service Providers.

This one is so obvious, I almost missed it. It should really be number one, and will be in the final summary. Users are the critical aspect of making software work. Without users we end up with what we have today. Applications that users tolerate. This focus and drive towards the user will continue until the users feel the developers are reading their minds. That is what agile development methodologies can provide the user community. Anticipation of what the user will want.

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

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270 Billion Man Days per Day

That is the number of "man days of labor per day" that are offset by the consumption of 120 million barrels of oil and gas. 270 Billion man days per day.

Here are my calculations. How far can a fully loaded semi-trailer travel at 60 MPH on one barrel of oil? (42 gallons x 6 mpg = 252 miles) How much effort would it take to move that product (80,000 lbs) that distance without the benefit of energy. Lets suggest a man walking with 100 lbs of product @ 3 mph, it would take 800 such men 84 hours to move that weight that distance. That is total of 800 x 84 = 67,200 hours of energy equivalent labor. The world produces approximately 120 million barrels of oil and gas per day. 120 million x 67,200 = 8.064 trillion man hours and 1.008 trillion man days of physical labor offset each day. [Please note I am using the 18,000 (or 270 billion man days) man hours in these calculations as all energy use may not be as efficient as the semi-trailer example noted.] Kind of makes systemic risk and the potential of global warming, 50 years from now, look irrelevant.

Here is what we know. Prices for oil and gas have increased substantially in the past decade. These have fueled record activity, yet we still have an ability to produce only 85 million barrels of oil each day. I suggest we are organizationally constrained and are unable to achieve greater volumes of energy production. The bureaucracy can only run so fast.

We're fooling ourselves if we think we can get along without petroleum based energy or even a small decrease to what we use today. With China, India, Brazil and other countries joining the middle class, the future demand for energy will be significant. We need to solve this problem and that is what People, Ideas & Objects is focused on providing. Moving the organizational construct of the industry to the Joint Operating Committee. The legal, financial, operational decision making, cultural and communication frameworks of the global oil and gas industry.

Management are correct to have recognized this is not their problem. I say this with the greatest volume of sarcasm possible. Who's responsibility is it? To sit and do nothing about the scope of this issue shows a complete failure by those that are responsible. It won't take too much to get out of line in order for the collapse of society as we know and understand it today. If demand begins to develop, or supply becomes more challenged, rationing could precipitate the decline of our standard of living and force us to make choices that we should not have to make. All because the management didn't see that their product became so valuable to society. Maybe they are blind. We should start taking the names of the people that are willing to forgo their use of energy and hold them to it. Any rationing of energy is as logical and costly.

What is the future of this industry? Will it be the bureaucracies that are in power for another 100 years? Do we just let the world figure this one out on their own? Is there money to be made in this environment? It's time we began to take this opportunity and start providing the world with the potential for 2 trillion man days of effort, offset every day. What is our potential? And should we limit it so willingly?

People, Ideas & Objects proposes we build the systems to support the Joint Operating Committee. The design of these systems are detailed in this blog, the Preliminary Research Report, and Draft Specification. A design that moves the compliance and governance of the hierarchy to be in alignment with the five frameworks of the Joint Operating Committee. A design that enables innovation in the earth science and engineering disciplines to accelerate and meet the market demand for energy.

By saying things of this nature I risk alienating the status-quo. I say let them cut my budget. And it's no longer just me talking about this problem. In a blog post today, Professor James Hamilton is noting similar warnings. 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 26 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 director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Strategy + Business on Oil and Gas

Strategy + Business magazine have put out a short summary of their perspectives on oil and gas. Please note People, Ideas & Objects only concerns itself with the upstream portion of the industry. The marketing and refining are continuous process businesses that are somewhat serviced by the SAP type of ERP application. No comment regarding the downstream portion of the business is included in this summary.

The S + B article talks of the current trends in oil and gas. These being un-conventional gas and the "better" management of supply, particularly by OPEC, to meet the diminishing demand for oil.

Yet, refiners and natural gas producers stand at a critical juncture and need to carefully assess the implications of reducing capacity to bring the overall portfolio in line with new forecasts for future demand and supply. They must also consider how to out-execute competitors; e.g., through better operating approaches and improved use of technology. We envision an escalating M&A and joint-venture environment as companies seek to achieve these advantages in position and operations.

These recommendations resonate with the position of People, Ideas & Objects Draft Specification. The strategy we recommend for the producers to pursue is to focus on developing their scientific and engineering capabilities. And application of that science based capability to their asset base. The following are the S + B recommendations for oil and gas producers.

• Concentrate and invest in areas where you have, or can build, significant capabilities that give you the “right to win.”

• Focus on and nurture your best assets, the ones that are outperforming or that can outperform the competition on the relevant supply curve.

• Divest or shut down lagging assets, permanently or temporarily

• Pursue M&A, and joint ventures, as needed to create or access advantage in position and execution.

Lastly, S + B note that now is the time to prepare for the future of the industry.

With so much uncertainty in the energy sector, one thing is clear: 2010 will be anything but a dull year in the oil and gas industry. Difficult periods are often the best time to prepare your business for expansion and growth. Companies that don’t shrink from the task will be the clear winners when industry conditions improve.

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

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McKinsey on User Participation

McKinsey & Company publish a blog entitled "Perspectives on Business Technology".

This site is published by the Business Technology Office of McKinsey & Company. It offers perspectives and points of view on topical business technology issues of interest to executives. Opinions are those of the authors and are not drawn from confidential client information.

They recently ran a short series of posts on 'user participation', a topic that is of keen interest to People, Ideas & Objects. We are focused on the user of the software defined in the Draft Specification. User driven software developments have proven themselves superior to the point where I believe it would be redundant to attempt to bring a solution to the market without the establishment of an active user community. The user community and the Community of Independent Service Providers are critical to the quality of People, Ideas & Objects.

McKinsey discuss the current state of user participation in this four post series. These posts can be found here, here, here and here. The process necessary to become a member of the user or CISP communities requires a little work on behalf of each individual. I feel it is important that once in the community the people are able to actively participate and contribute. The application process enables this through the development of the users own ideas and areas of interest. Once these are reflected in their summaries they will be posted in the wiki for all members of the communities to search and discover like minded people. Then the real fun can begin.

McKinsey note that there has to be a trade off. In their conclusion they note the balance required for high-quality participation should involve some effort.

Our recent observations suggest that participation is here to stay, but stimulating continued high-quality participation is complex. It requires a subtle balance of rewards and effort, a thoughtful segmentation of participants and a comprehension of the social structures of participation.

I think that we have been able to strike that balance with the expectations noted in the process to join People, Ideas & Objects. And that does not suggest that the process as it stand won't change. McKinsey note this is somewhat of a black art and we will try hard to find the right balance as we proceed.

These competencies are not easy to grasp, which explains the persistence of power curves of participation, and why only a small number of companies have been able to truly pull it off. But recent data also shows that mastering the art of enabling participation can deliver a major payoff.

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

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Three weeks left...

That is we have three weeks left in our 2010 budget drive. We still have no commitments, funding or support of any kind. It was an objective of this funding drive to provide evidence to the directors, shareholders and investors of oil and gas that the management are too conflicted to support these developments. Again, the evidence is in. Management have done everything in their power to ensure these development don't happen.

Our appeal to the shareholders and investors is to bring about a competitive means of organizing the oil and gas industry. Just as Bear Stearns and Lehman Brother's managements didn't provide an alternative for their shareholders, I hope to appeal to the shareholders in oil and gas firms.

I believe there is a far bigger issue at play in the oil and gas industry in comparison to the banking industry. No one is missing either Bear Stearns or Lehman. Other then the shareholders that is. In oil and gas the economy is the direct benefactor of the energy the industry produces. We have documented here many times the calculation of 18,000 man hours of effort that is offset by each barrel of oil. By not having those barrels freely available to the consumer denies the full potential of our market economies.

This isn't the role or responsibility of the management of the oil and gas firms. At least that is what they suggest is the case in their version of the market economy. Who's responsibility is it to ensure that markets are well supplied? If the oil and gas producer's are not responsible, who is? At some point the issue of a lack of supply will require an answer. What will the oil and gas industry say at that point?

Last Tuesday I wrote about the use of some of the new mobile devices in making and implementing decisions at the Joint Operating Committee level. I also indicated that Exxon could not provide the marketplace with that type of software offering. If Exxon or any single producer were to provide a software solution like People, Ideas & Objects, it would cede too much information to Exxon or the producer. There are two other points to consider. One is the ability to have all the producers on the same technical capability, and the need to have one software supplier.

The ability to have all the producers representing the JOC using the same software denotes some of the value of using the Cloud Computing model. Accessing the most current version of the software and knowing that everyone else is using the same tools facilitates and enables collaboration and communication. When the application's are also transaction aware and able to manage the business based on the decisions of the JOC, then it can truly begin to optimize the science and engineering innovations.

The second point is how the industry is run today. Multiple vendors each providing one slice of the functionality to some of the producers to the JOC. Others are using other systems that are provided by other vendors who have different technologies and perspectives. Having the virtual meeting that I mentioned, with all of the potential described in Tuesday's blog post, will have to come with 15 IT personnel supporting the interactions and protocols. Good luck.

The need for one software development capability should be clear to readers of this blog. I have used the Intellectual Property developed in my research and this blog to concentrate these software developments to mitigate the issues in the energy industry. The use of Cloud Computing and the potential ease-of-use between producer firms requires one ERP solution provider.

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

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