Postings to resume...

I've had some rather extensive surgery on my eye. Over one and a half hours for the surgical procedure, and I can see better then I ever have. That was my seventh cataract or related surgery. And the first time that I have had the opportunity to have Dr. Howard Gimbel perform the operation. If you are looking for an eye surgeon, I don't think there is any better, look him up.

I'll resume regular posting tomorrow and continue on with the work that we are doing here at People, Ideas & Objects.

Thanks

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Alfred D. Chandler, an introduction

There are a large number of papers that have been published highlighting the work of Professor Alfred P. Chandler. Chandler's work can best be summarized as providing an historical context of the American corporation over the 19th and 20th Centuries. To start this review I want to highlight a few papers of interest, the reason we are beginning this review, and what we hope to gain from a review of the history of the corporation.

Our review of Chandler has been rather limited for such an important topic. Other then reviewing a number of Professor Richard N. Langlois' papers which built on Chandler's "The Visible Hand, The Managerial Revolution in America", no direct research of Chandler has been conducted for People, Ideas & Objects. I expect to read his three premier books "The Visible Hand", "Scale and Scope", and "Strategy and Structure" as well as a handful of his papers.

The first paper provides us with an understanding of the scope and scale of Chandler's historical work. The paper is written by Professor David C. Mowery from the University of California at Berkeley. The paper is entitled "Alfred Chandler and knowledge management within the firm". This will be the first paper we review as it provides a strong basis of the historical record that Chandler established. This paper also acknowledges Richard R. Nelson, David Teece, and William Lazonick for comments.

The second paper to be reviewed is written by Professor William Lazonick and is entitled "The Chandlerian Corporation and the theory of Innovative Enterprise". Mowery's and Lazonick's papers will be the first two papers that are reviewed. All of Chandlers works can be aggregated by using the Chandler label when the reviews are published.

The reason to go back and look at the history through the works of Chandler and others is to gain an appreciation of why things are done the way they are today. As Mowery states: "By highlighting the historical forces that underpinned the growth of the large industrial firms that dominated the global economy for much of the 20th century, Chandler's work will enable future scholars to better understand the new factors that are transforming the 21st-century economy." Or in other words, those that fail to learn from history are doomed to repeat it.

These reviews will be conducted in addition to a number of other researchers works. We have a large, strong group of authors that we are now following, and I have over 20 papers that I will be reviewing.

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 V

Our concluding post of our review of Professor Carlota Perez' "The New Technologies: An Integrated View". To contrast this post to yesterday's discussion around our funding failure, reflects the surreal nature of the work here. There is much academic support, unanimous agreement with people who know enough about oil and gas, and general understanding that People, Ideas & Objects is the direction we should move, yet no funding. Professor Perez has based her research on the major economic events that have occurred in the last number of centuries. That her paper was first published in 1986 shows the quality and validity of her research.

RETHINKING THE ROUTE TO DEVELOPMENT

Contained within this paper's conclusion is a caution that once these paths have been taken, the need to sustain the development (of People, Ideas & Objects) is critical. A concern that is valid in any industry, but one where the oil and gas industry has been notoriously poor at. There are remnants of so many piecemeal initiatives littering the landscape, some in the form of commercial enterprises, that one should check their sanity in getting involved in this project.

What we do know is that the bureaucracy is on life support and will soon pass into history. Our problem is to ensure that alternatives are in place before the corpse begins to atrophy. In 2010 we stand on the shoulders of several generations of giants and could find the fall from these lofty heights painful. At 270 billion man days per day, we have far to fall and much to lose. We also know that Information Technology (IT) has been constrained and is now mature enough to be able to carry much more organizational weight. That is to say, society is demanding things be done in the easier manner provided by technology.

From what has been said no productive sector is immune to the influence of the new technologies. This implies that, into the future, most of existing plant is technically and organizationally obsolete. And with this, so are the notions and guidelines that resulted in its establishment. Hence the productive structure of each country from one end to the other must be reexamined under the light of the new conditions. p. 42

And that re-examination is here at People, Ideas & Objects, based on the Joint Operating Committee and represented in the vision of the Draft Specification. With the five year time frame noted in which to develop the Draft Specification, and five years being a minimum number of years for management to come up with their own specification, what alternatives do we have. As each day passes we lose time in which the final solution is brought to market, because of a lack of funds!

To affirm this begs the question of how to go about it. The only answer is that the new routes will necessarily result from a massive process of social creativity. The important thing is to point out that the space within which to invent them is new and different. Here we shall limit ourselves to indicating some general guidelines stemming from the features of the new paradigm. These can serve as a starting point to rethink development strategies. p. 42

Management will no doubt want their solution to be in the top-down manner that they are used to. People, Ideas & Objects is a user based, bottom-up solution based on the vision of the Draft Specification. Taping into this "social creativity" is what the technologies provide, we would be foolish not to want to incorporate it. It is reasonable to predict this approach will provide a quantum increase in productivity and efficiency.

In this context it is important to note that the new forms of organization can, by themselves and with a minimum of new equipment, significantly raise efficiency. Moreover, experience acquired after reorganization is the best source of criteria for selecting the most adequate and truly indispensable new equipment to incorporate. This has been shown again and again in Japanese plants and is in agreement with the results of a study conducted in the UK. The reorganization route can serve to revitalize and modernize certain sections of the existing industrial basis with modest investment costs. p. 43

What we are unable to do in this project, is to rally the financial support of the management. Information Technology investments have proven controversial in oil and gas, what has / needs to change to fulfill these possibilities?

We have already referred to the key role of technological dynamism in the new paradigm and the intermediary function performed by software and systems engineering firms in bringing the adaptive potential to practice. This means that taking true advantage of the new model requires a leap unto the new technologies. p. 44

And for the really tough part...

What does have to be understood is that the effort has to be sustained and concentrated. Once in the race, technological dynamism has to be maintained at the rhythm of the international frontier. This, in countries lacking a risk capital market and an adequate network of industrial services, requires a strong policy of promotion and support, capable of stimulating research and innovation and providing appropriate externalities. p. 45

I can only assume based on our 2010 funding failure, that a sustained effort can only be achieved by a chronic fear brought about by the failure of the bureaucracies. I say that on the basis of the amount of work we have to do, and the amount of time before a solution is needed by the market.

Nonetheless we believe that preparation for the future cannot be postponed. Once a world upswing is unleashed, development prospects for each country will depend not only on the level of development attained in the previous wave but also in having been capable, early enough, of creating the conditions for taking best advantage of the new. p. 46

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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Ten Days To Go

With ten days left in our 2010 budget drive, we have eight business days to secure our funding. To date we have received no support, no indication, no commitments, nothing. One of the objectives of this funding drive is to provide evidence that the management will never support these developments. They are too conflicted, and are in no hurry to establish any competition for their services. With all that we have discussed here in the past three months, it's surprising that this project doesn't generate the support it needs. I'm obviously unaware of the great systems management has planned or are using today.

With the abysmal amount of money that is spent in oil and gas on software development, we can assure ourselves that nothing is being done. With the lack of financial resources being committed to this project, it is clear that expectations of another group lining up to "break their pick" are surreal. You truly reap what you sow.

Another aspect of management is the clear lack of concern for the markets demand for energy. Management will provide what they can when they can, and the rest is left up to the someone else. It's not their problem. This hands off approach to the marketplace displays managements lack of concern outside of their domain. That may have been the way that business was done in the past. If we all think that way today, then all of our futures will be more uncertain.

With the lack of funding, there is no lack of desire for me to bring this solution to the marketplace. I will agree the probability and possibility have become remote, if not improbable. I will continue to do what I can. Management wins in this scenario, and they will state they see the future in a different light to the one described in this blog. Without the clarity of an issue, being in the news, being on the mindset of everyone, it is difficult to rally the troops to resolve it. Which means of course, we will have to wait for that day when failure does occur.

Another aspect of this budget drive is to establish a certain point in time for me personally. I have sacrificed everything that I have to bring this project to this point. I now know that any failure of this project, temporary or otherwise, is not as a result of my efforts. I see the lack of energy becoming a problem in society, and I did what I could to avoid any difficulties. I no longer feel personally obligated to do what ever is required. Other then writing in this blog and building the community, there is little for me that can be accomplished. The financial resources of the industry are what are needed to move forward, and we will wait for that event to occur.

I am reiterating that the use of the Intellectual Property that has been developed is for the sole purpose and benefit of the communities that are represented at People, Ideas & Objects. Management may feel the opportunity to take these ideas and develop the systems based on this IP for themselves. I am providing notice to them, in this post, that no producer is authorized to use any of the IP that has been developed here at People, Ideas & Objects. Nothing. SAP and the systems vendors are provided with the same notice. The implications of these notices is that management will have to come up with your own ideas, develop them, and bring them to market. Remember, it only took me five years to develop the Draft Specification, I wish you God speed.

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 at least 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 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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