McKinsey Three Executives on Strategi...

McKinsey have an article entitled "How we do it: Three executives reflect on strategic decision making." Two of the executives, Randy Komisar of Kleiner Perkins Caufield & Byers and Anne Mulcahy, Chairman of Xerox make comments that are pertinent to the work we are doing here at People, Ideas & Objects. I highly recommend downloading the entire document and reviewing it. It has several points and ideas that should be added to your decision making tool kit.

McKinsey continues on with their discussion around the theme of behavioral strategy. Mr. Kosimar raises an interesting point in making decisions.

What makes this culturally difficult in larger companies is that there is often a sense that Plan A is going to succeed. It’s well analyzed. It’s vetted. It’s crisp. It looks great on an Excel spreadsheet. It becomes the plan of record to which everybody executes. And the execution of that plan does not usually contemplate testing assumptions on an ongoing basis to permit a course correction. So if the plan is wrong, which it most often is, then it is a total failure. The work has gone on too long. Too much money has been spent. Too many people have invested their time and attention on it. And careers can be hurt in the process. To create the right culture, you have to make very clear that a wrong answer is not “failure” unless it is ignored or uncorrectable.

The Draft Specification is most definitely Plan A. Plan B is the Preliminary Specification and each of our last months blog posts have concluded with the following comment. "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." Which goes directly to "create the right culture" for success for those involved in People, Ideas & Objects.

Anne Mulcahy has guided Xerox from bankruptcy in 2001 to the firm that it is today, a success story. She reflects on her leadership throughout this period. And provides us with an understanding that few can articulate and most can appreciate.

This was the first of many lessons about how to ensure high-quality decision making that Mulcahy would go on to learn during her nine years as CEO. In a recent interview with McKinsey’s Rik Kirkland, she distilled five suggestions for other senior leaders.

I'll leave it to the readers review of the document to reflect on the five suggestions. Applying these suggestions to the work at People, Ideas & Objects provides substantial value and that is reflected in the following quotations of Ms. Mulcahy.

Decisiveness is about timeliness. And timeliness trumps perfection. The most damaging decisions are the missed opportunities, the decisions that didn’t get made in time. If you’re creating a category of bad decisions you’ve made, you need to include with it all the decisions you didn’t get to make because you missed the window of time that existed to take advantage of an opportunity.

I hope that industry adopts People, Ideas & Objects Draft Specification. It's timeliness is reflected in the way that it resonates with the issues and opportunities in the oil and gas industry today. To take this opportunity, that took five years in the making, and the behavioral strategy that we have adopted in getting this solution right, right for the producers and right for the users of the applications, "trumps perfection", and the remorse "because you missed the window of time that existed to take advantage of an opportunity".

Proceeding with People, Ideas & Objects is risky, and as the previous quote reflects, not making the correct decision in the right time frame creates its own risks.

These days, everyone is risk averse. Unfortunately, people define risk as something you avoid rather than something you take. But taking risks is critical to your decision-making effectiveness and growth, and most companies have taken a large step backwards because of the current climate. I was CEO of Xerox for five years before we really got back into the acquisition market, even though we knew we needed to acquire some things rather than develop them internally. But we got very conservative, very risk averse, and also too data driven. By the time we would reach a decision that some technology was going to be a home run, it had either already been bought or was so expensive we couldn’t afford it.

The oil and gas industry has changed. Since 2005 our global productive capacity has stalled. Prices reflect this reality, and prices are re-allocating the financial resources to the most innovative producer. With this fundamental change in the business, we need to define and build the systems that define and support the innovative producer. That is the Draft Specification and the process of finding the right solution with People, Ideas & Objects.

Decisions have shelf lives, so you really need to put tight time-frames on your process. I would so much rather live with the outcome of making a few bad decisions than miss a boatload of good ones. Some of it flies in the face of good process and just requires good gut. So when trying to take bias out of decision making, you need to be really cautious not to take instinct, courage, and gut out as well.

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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Comments from the Oil & Gas Journal

Some interesting comments are being made in an article from the Oil & Gas Journal. Comments that reflect that our revised approach may find an audience. Entitled "Shale gas plays seen reshaping research, relationships", the article notes elements in play in the oil and gas industry that are 100% consistent with the assumptions that went into the development of the Draft Specification.

Focusing on the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer provides many benefits. One is the ability to enhance the quality and speed of the decision making processes around the property the JOC represents. Each producer has the same motivation with respect to the property. Financial interests drive consensus. Suppliers are critical elements of the quality of operations. The Resource Marketplace Module recognizes these facts and builds a collaborative, transaction-oriented marketplace environment to enable the development of the earth science and engineering innovations. The Resource Marketplace Module is integrated with the Accounting Voucher Module to design the transactions between the producers of the Joint Operating Committee and the suppliers they choose. Transaction design is the future producers greatest source of value-add.

Comments from the Oil & Gas Journal:

Shale gas, said Jonathan Lewis, senior vice-president of Halliburton’s drilling and evaluation division, is “fundamentally changing the energy landscape in North America and is doing so with unprecedented speed.”

Other likely areas of technical and scientific progress he cited for shale development are basin-scale modeling, formation evaluation, drilling optimization, underbalanced drilling, borehole steering, multilateral completions, and collection of data in real time.

Lewis also predicted a “new generation” of numerical simulation techniques and said that, beyond science and technology, shale plays are encouraging new “operations optimization and collaboration” as operators seek ways to “drive waste and idle time out of the process.”

The efforts have increased collaboration between operators and service companies, Lewis said. They also have increased the use of packaged services, such as drilling and completion, and of incentives in contracts.

All of which are comments that show the direction of the industry and the Draft Specification resonate.

There is also the market that People, Ideas & Objects have identified for use of this software. The Joint Operating Committee is globally systemic. Start-ups, National Oil Companies (NOC's), International Oil Companies (IOC's) and Independents have all been targeted for use of this software. The Oil & Gas Journal has something to say regarding this changing dynamic as well.

G. Allen Brooks, managing director of the investment banking firm Parks Paton Hoepfl & Brown, said the restructuring results from expansion of activity by national oil companies, the “struggle” by international oil companies “to find a new business model,” the movement of gas into its role as a transition fuel, and politics and taxation.

Gone are the days where the NOC's were operating all elements of the industry themselves. They too need the oil and gas producer and service provider to enhance and optimize the resources of their countries. It's a new day where a new approach appeals to all countries.

If the IOC's are struggling to find a new business model, may I suggest they review the Draft Specification. This specification has the cumulative efforts of five years of research into using the industry standard Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. In an industry where the scientific and engineering demands in each barrel of oil produced, are escalating, People, Ideas & Objects provides the technical infrastructure and software development capability to mirror the energy producers innovations. Most importantly, this five years of research is reflected in the Draft Specification. And therefore, producers can re-capture this five year period by subscribing to People, Ideas & Objects.

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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A new approach.

There is another way. That is to say, I have been focused on the motivation people need to make the changes to build this software application. Thinking that the decline of the bureaucracy, through economic atrophy was the only way, is myopic thinking. Certainly there are other ways, however, I have failed to consider them and have become unnecessarily pessimistic.

The fact of the matter is that change can be made through a variety of different ways. Lets take this time, post budget drive, to explore the possibilities and discover other ways in which we can constructively build the support for this project. If you have ideas or comments please use the comment feature on this blog or email me.

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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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.

Technorati Tags: People's Perez Organization Change Specification
 

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.

Technorati Tags: People's McKinsey User Community Governance Research Strategy