Professor David Mowery on Chandler

We now continue on with our review of Alfred D. Chandler's work. A review of the historical development of the corporation through the last century. This posts notes the publication of a new issue of Industrial and Corporate Change that is dedicated solely to Chandler for this purpose. This represents a large body of work which our review is being aggregated under the "Chandler" label of this blog. 

Much has changed in the past few decades when the seven sisters (Shell, BP, Chevron, Texaco, Exxon, Mobil, and Amoco) were dominating the oil and gas industry. They were able to generate much of the oil and gas reserves and production in the world due to the fact that they had the size and scale necessary to manage huge libraries of geological and production information and data. Floors of buildings were dedicated to the storage of this data and large departments were dedicated to maintaining these libraries. Next to these large investments were the geological scientists and engineers that were able to access these libraries of information and apply their knowledge on a global scale. These began to fade from prominence in the early 1980's, and today this information is provided through any number of systems that are generally available for a few thousand dollars per month. What was once a competitive advantage in the storage and use of scientific data, has been replaced by the pure scientific capabilities of the earth scientists and engineers.

So powerful were these libraries that most of the geologists trained at the seven sisters, and who had early access to these libraries, are predominately the heads of the independent producers today. Such was the power of those libraries that one could learn enough about a region, that the geologist or engineer could leave the firm, either purchase the property or buy some land and take the chance they would become successful. Chandler notes similar developments in all large businesses.

Indeed, Chandler’s earlier historical work on US railways highlighted the role of these large enterprises in training such manufacturing magnates as Andrew Carnegie and Edgar Thomson. But the importance of established firms as “incubators” and learning for the entrepreneurs who subsequently guided the formation and entry of new firms within the same industry suggests that the barriers to entry emphasized by Chandler were surmountable by individuals or firms able to transfer and improve on the knowledge that they acquired in established firms. p. 21

Although it was and is a science based business, the science today is pure in terms of its application. That is to say, it's more of a scientific theory that drives the start-up success in the business. Large producers are limited to picking off the start-up at the right time where the science is established and the value is not yet fully recognized. This has become a multi-billion dollar game of high risk, high reward science and knowledge based business. It is reasonable to assume that these databases and information were developed throughout the many decades that the seven sisters existed. However, I was only witness to their existence in the late 1970's and the demise of their effectiveness by Information Technology (IT).

This post deals with the paper "Alfred Chandler and knowledge management within the firm" written by Berkeley Professor David Mowery. However, I want to start with a document that is also included in this Oxford Journal "Introduction to Management Innovation: Essays in the Spirit of Alfred D. Chandler Jr." by Professor William Lazonick and Professor David J. Teece. I will start with a few quotations from Lazonick and Teece and then move to review the paper of Mowery.

Through a prodigious body of work that included the volumes, Strategy and Structure (1962), The Visible Hand (1977), and Scale and Scope (1990), Professor Chandler made the study of the evolution of business enterprise integral to the study of the evolution of economy and society. His work combined detailed historical investigations with grand sociological syntheses. As a result, Chandler’s study of the modern business enterprise invited social scientists and business academics as well as historians to contribute to our understanding of a central institution of our time.

and

In memory of a great scholar and in honor of his intellectual legacy, Industrial and Corporate Change is publishing this special issue of essays that build on Chandler’s work. We have chosen “management innovation” as the unifying theme of this special issue to emphasize the Chandlerian contribution to the analysis of the ways in which people who exercise strategic control over the allocation of resources put in place organizational structures that can enable an enterprise to prosper and grow.

This last quotation placing the context of the review that we are doing on the geological libraries of the seven sisters. Today the geological and engineering issues and the opportunities in the oil and gas are all known. What isn't known is how to solve or take advantage of them. For example tight gas formations hold significant volumes of natural gas. Most people know where the tight gas resides in the world, the ability to develop them into commercial fields is the trick. Now as the development of packers and multiple fractures on lateral wells becomes more commonplace, the science moves onto other issues. Maintaining a competitive advantage in this environment is temporary, and the firm needs to move quickly through the sciences or have the capability to aggregate oil and gas reserves by acquisition.

Sustainable competitive advantage in the large corporations that emerged from the historical processes analyzed by Chandler typically rested on more than technological capabilities alone. Instead, it was the creation of technological and organizational capabilities through corporate investments in management, manufacturing, and marketing, as well as the managerial ability to recognize the business contexts to which these capabilities were best suited, that differentiated successful from unsuccessful corporate performance over the long run. p. 2

I believe that all sizes and all types of producers would be advantaged by having People, Ideas & Objects Draft Specification built. In addition to having access to the geological and engineering technologies and capabilities, Mowery notes the organizational capabilities were necessary as well. Today the barriers to entry are not so much just the sciences, but also the ability to be in compliance with the various regulations and governance frameworks that govern the modern corporation. Recall we are moving the Compliance & Governance frameworks of the hierarchy to align with the five frameworks (legal, financial, cultural, communication and operational decision making) of the Joint Operating Committee. It is therefore in everyone's best interests that the compliance and governance required be provided to all participants in the oil and gas industry. What I am seeing is the past barriers to entry being the access to the geological libraries of the seven sisters being replaced by today's barriers of the compliance and governance frameworks of the modern corporations. This is unnecessary and an impediment to progress in the oil and gas industry.

Industrial R&D and the product diversification that emerged from the in-house R&D facilities of many of these firms contributed to the development of the so-called “M-form” corporation (the origins and development of which in the United States were examined by Chandler in Strategy and Structure), in which corporate management and strategy formulation were organizationally differentiated and separated from functional management. pp. 2 - 3

And that is why the bureaucracy exists. What was necessary for the seven sisters to develop this "industrial R&D" demanded that size and scope be managed through the layers of management and corporate management. This is not the situation today, the technology is available to support and identify the key organizational construct of the innovative oil and gas producers, that being the Joint Operating Committee, and a more direct form of ownership where the investor or shareholder is the owner of the properties interest.

For Chandler, therefore, the efficiency advantages of intrafirm coordination underpinned the growth of large firms and increased producer concentration, and explained the differential pattern of adoption during the late 19th and 20th centuries of these new methods for administrative coordination among US industries. p. 6

What has'nt changed in oil and gas is the ability to understand and operate within the industry. The tacit knowledge that is the critical resource that makes the industry operate. Although today it is far more disorganized from the perspective that these capabilities are not housed in one location, the value of the tacit knowledge is just as important, and possibly more important today then a few decades ago. Recall one of our break-through's is that tacit knowledge drives software definition. Tacit knowledge can't be captured, but it needs to be organized.

Central to these studies is the idea of an “integrated learning base” that is rooted in the technical, functional, and managerial capabilities that are embedded in the organization rather than individuals. Chandler argued for the knowledge-based foundations of all three types of capabilities: “ . . . the large enterprise performs its critical role in the evolution of industries not merely as a unit carrying out transactions on the basis of flows of information, but, more important, as a creator and repository of product-related embedded organizational knowledge.” (2005b: 6) p. 13

The technical, functional and managerial capabilities need to be identified and supported in a software application such as the Draft Specification. Otherwise we are destined to muddle along as the last remnants of the bureaucracy atrophy.

Chandler’s focus on a small number of established firms, most of which were founded before 1940, reflected his view that entry barriers and the development of technical capabilities within these firms precluded competition from entrants. p. 14

and

Chandler’s historical discussion stresses the contrasting paths of development of the leading German, British, and US “first-movers” in chemicals, and then considers the entry by large petroleum firms into the chemicals industry during the 1940s and 1950s, and the difficulties faced by US chemicals firms in particular in their efforts to diversify out of commodity chemicals. As was the case in electronics, the efforts of these firms to diversify into unrelated industries, ranging from oil and gas to residential construction, were consistently unsuccessful, which Chandler attributed to the importance of firm-specific capabilities and the limited applicability of these knowledge-based capabilities to very different industries. p. 15

Clearly energy's history accurately replicates these trends that Chandler discovered. Big oil and gas was able to attain scale through the management of information and knowledge. Technology has had a remarkably destructive effect on these capabilities. And today, the need to have these types of "technical, functional and management capabilities" need to be re-developed. But not on a global scale as they were by the seven sisters. On a scale that is represented by each and every JOC. The level of focus, in order to be successful, requires that strategy and structure be appropriate for the times. This level of focus (@ the JOC) is one of the break-through's that the Preliminary Research Report determined was necessary for the innovative oil and gas producer.

As I noted earlier, Chandler relied on a broad conceptualization of the knowledge relevant to the creation and maintenance of competitive advantage. p. 16

and

For Chandler, therefore, competitive advantage rests on more than technological knowledge alone. p. 16

In June of 2007, which was a critical time in terms of the development of the Draft Specification. This blog reviewed Professor Richard N. Lanlgois paper "The Vanishing Hand: the Changing Dynamics of Industrial Capitalism" in which the movement away from Chandler's visible hand of management was leading back to the invisible hand of Adam Smith's markets. Professor Langlois is one of the key researchers that was used in the development of People, Ideas & Objects. Mowery notes;

As Langlois (2003) pointed out in his survey of these developments, the “visible hand"; of Chandler’s large firms has been challenged in many industries by a revival of the “invisible hand,” as market-based coordination of transactions among vertically specialized firms partially or entirely replaces intrafirm management of these transactions. p. 18

We see through this historical perspective the work of Chandler being directly applicable to the oil and gas industry. I think we also see the need to act to reclaim what is necessary in terms of corporate organization today. As the bureaucracy atrophies, we have to deliberately replace it with something purpose built. Our focus at People, Ideas & Objects is to do just that.

In his 1973 Presidential Address to the Economic History Association (Chandler, 1973), Alfred Chandler characterized his historical research as being focused on the study of decision-making corporate strategy, and the historical development of modern industrial corporations. p. 21

and

His research on the emergence of the modern, multifunction industrial corporation emphasized the central role of knowledge management as a factor contributing to the expansion in the boundaries of the modern firm and eventually, to the development of the decentralized “M-form” organizational structure. Chandler’s later work on the long-term performance (including the collapse) of established firms in knowledge-intensive industries extended this research to cover much of the 20th century. p. 21

and

Although his research emphasized the importance of knowledge management in corporate strategy and development, it is difficult to develop testable or falsifiable hypotheses from much of Chandler’s work. His invaluable contributions to scholarship derive their force and influence from his masterful reading and synthesis of the historical evidence, rather than from the development of an analytic model or predictive theory. Indeed, as I noted earlier, Chandler’s work on modern high-technology industries failed to recognize the development of new models of competition that threatened the position of many of his older “core companies.” But the breadth of his analysis, spanning more than a century of economic development across three continents, distinguishes his historiography from that of almost any other recent scholar in business and economic history, and helps account for his lasting influence on both historical research and contemporary work on corporate strategy. 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. pp. 21 - 22

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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Focused on the Issue

Continuing on with a series of quick blog posts that summarize the 30 compelling reasons we developed during our 2010 budget drive. Compelling reasons for getting involved in People, Ideas & Objects. I have summarized these 30 reasons into eight "Focused on" summaries that started with the post Focused on the Energy Business. This will be our third post, with our second post, Focused on the User, being published yesterday.

The Issue

Since 2005 global oil and gas production has stalled. Energy prices reflect this fact, and are reallocating the financial resources to the innovative oil and gas producer. Each barrel of oil produced requires progressively more earth science and engineering effort. This trend in the increase in the scientific and engineering effort for each barrel will continue. Science and engineering is where the value in the industry is generated, and the capacity of the bureaucracy to keep up has failed.

We live in advanced societies where man has leveraged mechanical effort through the use of energy. We recently confirmed the calculation that each barrel of oil offsets 18,000 man hours of effort. This can also be restated by saying that we stand on the shoulders of several generations of giants. Energy is the lifeblood of our global economy. Any challenge in sourcing the required energy has a direct impact on our quality of life, and society will have far to fall if there is an energy shortfall. The bureaucracy in oil and gas assures us that there is plenty of oil, yet our production remains the same as in 2005. Resolution of this conflict may be as simple as management suggest, or it may be tragic.

Through research reflected in the Preliminary Research Report, the Draft Specification and this blog. The industry standard Joint Operating Committee (JOC) provides the innovative oil and gas producer with the necessary organizational construct to identify and support innovation in the earth science and engineering disciplines. The JOC includes the legal, financial, cultural, communication and operational decision making frameworks of the global oil and gas industry. Building the systems to define and support these activities is the necessary first step in beginning our approach to solve this issue.

Exxon has estimated that to meet the demand for energy, capital investments of $20 trillion will be required over the next 20 years. I believe we should approach a problem of this scope by first organizing ourselves. Otherwise we risk throwing money at the problem and getting no where. I believe we are beginning to see the beginnings of this issue affect the performance of the producers. Reporting that reserves and production continue to decline is the start of this process. After realizing the increases in prices for oil and gas, why would declines in production and reserves occur? Recently in the Calgary Herald, the Canadian National Energy Board predicts that Alberta's natural gas production will decline by 34% in the next two years. Clearly our organizations are failing society, and as the conflict reflected in our 2010 budget drive shows, bureaucrats are in control.

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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Focused on the User

People, Ideas & Objects are focused on the user. The user is the person who works in oil and gas and is involved in the commercial operations of the producer, or Joint Operating Committee they are employed or otherwise engaged by. Whether that is in production, exploration, accounting, legal, land, personnel or any other department or classification that may have been used before. Our primary users hold the tacit knowledge of how the industry operates. One of the many things that we have learned in this blog. Is that tacit knowledge drives software definition. To preclude the user from the software's development precludes success, literally. With People, Ideas & Objects developers, users define and build the software tools they need to employ their tacit knowledge and ensure the producer maintains the most profitable means of oil and gas operations.

There is a second classification of user in the People, Ideas & Objects communities, that of a member of the Community of Independent Service Providers (CISP). CISP's are application specific resources that are generally employed through contractual arrangements with users, producers, JOC's and People, Ideas & Objects directly. CISP's provide services such as help-desk, accounting systems installation and integration, accounting service provider, training, or conference planner, to name just a few, on the People, Ideas & Objects applications.

All users maintain a relationship within the community through the license agreement between themselves and People, Ideas & Objects. Through the license users are provided with unlimited access to any and all of the Intellectual Property (IP) contained within the applications and communities. Access is provided at no cost to the user. This access to the Intellectual Property enables the focus of the users and CISP to be dedicated in an unconstrained manner to the issues and opportunities of the producers and JOC's.

It is through the license between People, Ideas & Objects and the producers that we are able to generate the software development revenues from this IP. Users and CISP's are free to generate income from the associated services they provide with the software. Producers and JOC's who's users use the applications will be required to pay for the use of the software. This is to ensure that the developments of the software and communities are not restricted in terms of what is possible.

One of the advantages of handling the IP in this manner is the producer and JOC's level of collaboration is facilitated around one software development vendor. Having different software applications operating in the industry limits the quality of the interactions between the producers represented in each JOC. These limitations can be seen in the following two expamples. Imagine if Exxon was the software provider, would any other producer be interested in using the applications? Or, if each member of a JOC were using a different software vendors applications, would each participant be able to use the new technologies as effectively as if they were all using the same system? Using one software developer, based on its IP, puts all the producers and users on the "same page" in terms of technical capability.

With the development of technologies, new ways of working together are being developed. As noted here, Sun Microsystems / Oracle has developed Project Wonderland that provides People, Ideas & Objects developments with the ability to have Avatars represent members of the user communities. Users Avatars could be deployed to negotiate agreements in a virtual environment, or deploy clones to actively market an oil and gas property in the Petroleum Lease Marketplace. The point of this discussion is to show the difference in terms of what can be done when applications are dealing in metaphors of Avatars and Marketplaces. For example, yesterday we discussed the new form of economic organization for the oil and gas investor, shareholder or director. The users in these communities are also reflective of this new economic organization.

People, Ideas & Objects are able to maintain their user focus as a result of the uncompromising manner in which this project is financed. Producers pay for the development and use of the software. The software and developments are not constrained by any debt or equity markets that People, Ideas & Objects may have participated in. Ours is an IP based constraint or opportunity. The focus can therefore remain on the user, the producer, the JOC and the innovative nature of the industry. Not on People, Ideas & Objects need to meet the next quarters reporting requirements.

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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Proof

Our 2010 budget campaign is now over. We've raised the total of $0.00 and documented over 30 compelling reasons that People, Ideas & Objects should be funded. Yesterday we saw that management have many alternatives at their disposal, all of which distract their focus from the issues facing the business. Shell's CIO accurately reflecting how lost management has become.

I feel the evidence that we have provided in this web-log, over just the past 90 days, proves that management will never fund these developments. Their situation is comfortable, therefore People, Ideas & Objects shares many of the same complaints about management as the directors, investors and shareholders in oil and gas.

It is therefore in our best interests that we cultivate this community and establish a long-term funding, and mutually beneficial, relationship with directors, investors and shareholders. The stated purpose of doing so should be to eliminate the type of self-serving management and bureaucracy that is the source of our mutual difficulties.

Getting back to the business of the oil and gas business is an urgent requirement of society. Management feel they have the capabilities to raise the global production profile at will and that is their stated position. I believe there is money to be made in the energy business and the need to organize ourselves for the task at hand is our first priority. Organizing ourselves in the manner as defined in the vision of the Draft Specification.

So with this post, I want to formally recognize the director, investor and shareholder as forming a community that we represent here at People, Ideas & Objects. With this post I will aggregate all the discussions around the label Ownership-Community. As we focus on the process of building the User, Community of Independent Service Provider and Ownership-Communities for the remainder of 2010. It is with regret that we can not fund any developments until we have sourced adequate funding, however, there is still much that can be done.

It is reasonable to ask if this is a new form of economic organization? Yes, it most definitely is. And therefore, we begin to look at the works of Alfred D. Chandler. With the hope and understanding of determining new research and ideas from a review of corporate history and its development, we will continue onwards.

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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Focused on the Energy Business

The purpose of this post is to highlight the differences between the systems that People, Ideas & Objects proposes to provide in the Draft Specification, and what management are providing the producer firms today. With this being the end of our 2010 budget drive, the contrast is surprising.

Within the Draft Specification we set out to build an application that deals with the issues that the innovative oil and gas producer is facing. Keeping up with the demands in the earth science and engineering disciplines. Basing the system on the Joint Operating Committee and designed to facilitate a greater level of speed and innovativeness within all producers. Providing the producer with the most profitable means of operations.

Today, I stumbled upon this McKinsey article that documents the state of affairs in Royal Dutch Shell. The interview is with Mr. Alan Matula, Executive Vice-President and CIO. I think it is best to read the article first, and then watch the video below to try and get a feel for what Mr. Matula is talking about.



What planet is Mr. Matula from? Is he serious? And if so, what industry is he in? My god, I can't believe that Shell would even hire this guy, unless of course, they all speak that way!

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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Last day of our 2010 budget drive.

There is little time remaining in which we could raise any money in our first quarter 2010 budget drive. The consequences of not having our budget funded are many. The two critical consequences are the probable loss of one years time in which to bring the application to market. The second is the imposition of penalties to all producers for the 2010 fiscal year. These penalties are set at 300% of the fee, and therefore, effective April 1, 2010 the total costs of participation to each producer will be $4.00 per barrel of oil per day of production.

There may be a period of time in September 2010 when we can fund our budget, but based on the effectiveness of this past quarters budget drive, the probability of that remains low. Realistically, 2011 will be the earliest time in which we have the opportunities present themselves as they are here today.

What will happen in 2010 will therefore be of limited value in terms of progress. Development of the community is one of the limited options we have, limited in the sense that the community needs to see the producers support these developments. Participation by the community will be crippled without the producers financial resources.

In terms of postings to this blog, I don't see any reason why the pace and frequency can't continue. There is much to discuss in representing the variety of technology and research topics that we follow, and how the Draft Specification could fit into the industry. Besides writing on these topics is too much fun to quit.

So here is to a less pressured 2010. We did what we could and the producers don't share our concerns. Should they change their minds they'll know where to find us. To those who are regular readers, please stay tuned as the desire to continue with this project is strong. Just because the producers don't share our concerns, doesn't mean they won't come around. After all, we have now proven to the investors and shareholders that the bureaucracy won't fund this software.

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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Agile Teams - Business Analyst Position

Version One provides software for agile development teams. We have, and will continue to highlight a series of .pdf's they publish to help describe the various roles and responsibilities of agile team members. These are contained in blog posts here, here and under the Agile-Scrum label. Today we are highlighting another position thanks to Version One's .pdf "The Agile Business Analyst". [Note the link takes you to a page where you can request downloads of all their .pdf's.]

How many Business Analysts positions will be on People, Ideas & Objects twenty development teams depends on a number of factors that can't be determined at this time. There are however, many things that we can learn about the agile methodology and the work that will be done on those teams by reviewing all of Version One's .pdf's. So what is a Business Analyst on an Agile development team.

Agile development is having a significant impact on the Business Analyst community. Agile introduces a significant shift in how teams look at requirements and when they are defined in the process. Agile Business Analysts are an integrated part of the team throughout the life of the project and facilitate collaboration across a broader cross section of the project team and the business.

and

Collaboration, facilitation, leadership, coaching, and team building become significant new skills required for Business Analysts on Agile projects. Leadership and collaboration are key components critical to their success.

Gone are some inherent assumptions about the Business Analyst. The following list shows the difficulty in the position as has been defined in previous software development methodologies.

• Assumes that the customer can definitively know, articulate, and functionally define what the system or software should do at the end of the project
• Assumes that, once documented, the requirements will not change – at least not without potential project delays, budget overruns, or stunted feature sets
• Assumes that the requirements process is confined to a single product owner who sits apart from the development team envisioning the product
• Does not acknowledge the inherent uncertainty in software development that Agile methodologies seek to embrace

These four items are flawed from the outset. The agile team can not make these types of assumptions. It is certainly beyond the scope of reasonableness to assume that the Business Analysts can deal with this much ambiguity. Recall our recent blog post entitled "Designed to hit a moving target" that highlights a 47 minute presentation of the Agile Software Development Methodology. Version One then summarizes Agile Project Management in terms of what is possible.

Agile Project Management assumes that the processes required to create high-value working software in today’s economy are not predictable: requirements change, technologies change, and individual team member productivity is highly variable. When processes are not static and outcomes cannot be predicted within sufficient tolerance, we cannot use planning techniques that rely on predictability. Instead, we need to adjust the processes and guide them to create our desired outcomes. Agile project management does this by keeping progress highly visible, frequently inspecting project outcomes, and maintaining an ability to adapt as necessary to changing circumstances.

People, Ideas & Objects Draft Specification seeks to provide an overall vision of how the application would define and support the innovative oil and gas producer. This vision is the key input of the Preliminary Specification. This next quotation from Version One accurately captures what I think is a necessary deliverable from the Preliminary Specification.

To effectively deal with scope on an Agile project, specifications must be considered in two dimensions: breadth first and then depth. It is essential that we understand the breadth of what we want to build early in the project. Dealing with the breadth of the solution helps the team understand scope and cost and will facilitate estimating and release planning. The breadth of a project begins to frame the boundaries of the project and helps to manage the organization’s expectations. Looking at the breadth of the requirements is a much smaller investment of time and resources than dealing with the entire depth. The details are most likely to evolve as we progress through the project so defining them early has less value.

The Draft Specification is the vision, the Preliminary Specification is the breadth and the Detailed Specification is the depth. It's almost like we knew what we were doing! But seriously, the breadth of the application is of key concern to the producers in the oil and gas industry. If you want the application to mirror accurately what your organization should look like, then participation is mandatory. Participation requires that the producer firm fund these developments, and secondly get involved in these developments and help to define the breadth of the application within the Preliminary and Detailed Specifications.

Having a solid understanding of the breadth of project requirements early in the life-cycle helps the development team begin to define the set of possible solutions. The Business Analyst plays a key role facilitating the conversation between the product owner, executives, the technical team, and the QA team. The BA is a key player in ensuring that the full scope of requirements has been defined and balanced by an overall technical understanding of the solution.

The Business Analyst Position begins to have a significant impact on the quality of the developments from this point forward, the Detailed Specification.

Once the team has established the breadth of the solution, it is time to begin incrementally looking at the depth of the solution. The BA will typically take the lead helping the team bring the requirements down to this next level of detail. To incrementally look at the depth of the requirements, we have to abandon our traditional notions of the Marketing Requirements Document (MRD), Product Requirements Document (PRD) and the list of “the system shall” specifications. Instead, we focus on how the system is going to behave.

and

Much like the Agile Project Manager, the Agile Business Analyst will rely much more on people facilitation skills than they may have on traditional projects. The BA’s role is to facilitate a discussion between the product owner and the technical team. The BA will typically bring a tremendous amount of system knowledge to the discussion and is well positioned to draw out functional requirements from the product owner. BAs can also help translate user needs into more technical language for the developers.

People, Ideas & Objects assumes that the energy producer is organizationally constrained. The organizational ability to keep pace with the underlying changes in the earth science and engineering disciplines needs to be purpose built through the vision of the Draft Specification and this software development methodology. To suggest otherwise assumes that we have the time to contemplate alternatives, or to continue to muddle through. As is stated in Version One's conclusion to the Business Analyst Position, that is not an option.

Success in today’s economy requires us to respond quickly to changing market conditions. Traditional product delivery methodologies cannot deliver fast enough in highly uncertain project domains. Agile processes allow teams to meet the changing demands of their customers while creating environments where team members want to work.

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 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.

Technorati Tags: People's McKinsey Strategy Change Failure
 

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.

Technorati Tags: People's Innovation Specification Change
 

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.

Technorati Tags: People's Change Communication Management