The Marketplace Metaphor

The Draft Specification includes three modules that employ what we call the Marketplace Metaphor. The Petroleum Lease Marketplace, Resource Marketplace and the Financial Marketplace Modules. Each of these modules create an environment that is similar in many respects to a marketplace in the “real” world. A virtual representation, and means for people to interact in marketplaces. Definitions of a marketplace include;

market: the world of commercial activity where goods and services are bought and sold; "without competition there would be no market";

The Petroleum Lease Marketplace (PLM) is a virtual market where partners can interact with each other to post and bid on petroleum leases, negotiate and execute agreements, buy and sell properties to name just a few of the many activities that can be carried out in the PLM. The PLM is designed to facilitate and support these transactions and activities, and capture the data and information necessary to manage the assets for the producers involved. 


The PLM is in many ways the beginning or initiation of the JOC. Since the JOC is the communication framework of the industry, many of the partners communications will be held within the Petroleum Lease Marketplace module. Mail ballots, AFE’s and agreements are initiated by the user while using the PLM module. 

The Resource Marketplace module creates a virtual representation of vendors, suppliers and the people who work within the oil and gas and service industries. Working closely with the Knowledge & Learning and Research & Capabilities modules, the Resource Marketplace provides the producer or JOC with the ability to interact within the Resource Marketplace to engage with vendors for the products and services that producers and JOC’s need. These interactions will include the capacity to contract, seek bids, billing, accounts payable and e-commerce capabilities. 

Recall in a recent post we documented how the Draft Specification facilitated a greater level of specialization and division of labor. These two economic theories being the source of all economic growth. That post documents that the process of “gap-filling” is how the division of labor is expanded. This “gap-filling” is part of the Resource Marketplace where producers and suppliers find one another in an effort to expand the output of the industry. 

Finally the Financial Marketplace module provides a virtual representation of the financial marketplace. Using the perspective of the Joint Operating Committee presents a different view of the oil and gas assets. Traditionally each producer has maintained their own financing of their oil and gas assets. What the Financial Marketplace module does is change the perspective, of how oil and gas assets are financed, from the producer firm to the Joint Operating Committee.

Each of these marketplace modules employ the People, Ideas & Objects user vision. The point of this post is to reinforce the use of the marketplace metaphor in the development of these systems. When we adopt the Joint Operating Committee as the key organizational construct of the innovative producer, we gain the ability to create this kind of software and methods of interaction within real and virtual marketplaces. 

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Market Governance PLM

Asynchronous Process Management Success

One of the cornerstones of the People, Ideas & Objects “Technical Vision” is Asynchronous Process Management (APM). I have described this type of functionality as it relates to communications, as a phone call is synchronous, and a letter would be asynchronous. The letter provides the communicator time to interact more deeply and to contemplate the response more thoroughly. Applying this communications metaphor to Process Management is directly applicable.

In a recent post we discussed the scenario around the timing of the voting and implementation of a plan to increase natural gas production. Where the participants within a Joint Operating Committee were asked to vote on a prescribed course of action. The description in that post imputed the implementation of the plan would be immediate, during the virtual meeting. In the real world, there would need to be time for each participant to consider their decision. The ability for participants to take the time to think what their next action will be, and based on those actions, implement and complete the appropriate management of the earlier initiated process.

Technology has expanded significantly in the past ten years. Particularly with respect to having multiple threads and multiple cores of application processing. Simply defining when an applications process can be broken down into multiple steps is easily handled by the developer and today’s advanced compilers. The problem with this processing is that the timing of each operation is unpredictable and therefore the sequence of when the program will be completed is random. In the oil and gas situation where partners were voting on a proposal for further operations, those operations would not be able to be commenced until the voting was completed, or adequate votes in the affirmative were received.

Today, the software developer has tools that provide the ability to control the timing of dependent processing in the software. This opens the world of systems development to higher levels of performance, processing tasks in parallel shortens the processing time required, and allows for advanced Asynchronous Process Management such as the People, Ideas & Objects technical vision.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Asynchronous Capabilities Development Process Software

More on our Business Model

The business model and value proposition of People, Ideas & Objects are fundamentally different then any other software provider. Based on a number of assumptions that involve the use of the Joint Operating Committee (JOC) and the cloud computing delivery model, this post details some of those elements of this software development project.

Using the Joint Operating Committee presents some interesting opportunities and difficulties. Providing producers with a software development capability, and software applications that support start-ups, Independents, International Oil Companies and National Oil Companies is necessary as the partners within a JOC could and will be formed from any and all of these types of producers. Partners within a JOC need to have the same systems in order to optimize the interactions between themselves. Having only one producer working off advanced collaborative systems like that proposed in the Draft Specification, severely limits the value realized by each and every one of the producers. 


Take for example the situation that deals with the decision making authority of the JOC. Participants are asked to approve a course of action to increase natural gas production. AFE’s and a proposed team to undertake the program are voted on by the members of the JOC. Seventy six percent of the working interest ownership agrees with the program, surpassing the 75% necessary for a decision to pass. Since all members of the JOC are using the same software, the AFE’s become active within the system, and the individuals calendars and tasks are updated with the approved program. The speed in which the program is approved and implemented is facilitated by the collaborative elements of the People, Ideas & Objects systems. 


Each member of a JOC will be able to participate virtually through their mobile / desktop device. These systems will be recording the key decisions and initiating the actions that are decided upon in these virtual meetings. In the future, the oil and gas industry participants will need to be able to decide and implement plans of action on a much faster basis then today. The speed and volume of the decisions that will be needed within the innovative oil and gas producer, I expect will grow in the near future. It is my opinion that the speed of the decisions being made today are the reason for the poor performance of the oil and gas companies. Poor performance in terms of reserve replacement and production increases. This is because the decisions that are being made are not at the Joint Operating Committee level, the JOC has the authority, but these processes are obstructed by the internal decisions being made within each producer (management). 


When each of the participants are supported by the same systems and software development capability, each are able to collaborate and implement the decisions based on the outcome of the voting. Accessing this type of operational efficiency is one of the inherent values that People, Ideas & Objects provides the producer firms. When we discuss the value proposition of People, Ideas & Objects, this type of value is one of the benefits that producers earn from using the Draft Specification. 


Additional value is generated when we realize the costs to the producer, to have this software application available to them, is allocated over the entire population of oil and gas production profile. The industry as a whole is being assessed the costs to develop the software, once. Compare this to the current model of purchasing software from a vendor who’s key asset, the software application, is sold to each producer. People, Ideas & Objects competitive offering is based on a software development capability, not on the software code itself. A competitive offering that is not constrained to one static piece of software code, a competitive offering that mirrors the incremental changes in the innovative oil and gas producers.

Another assumption that is inherent in the value proposition of People, Ideas & Objects is the determination of what an innovative producers competitive advantage is. That is the oil and gas leases, the physical producing assets and the earth science and engineering capabilities applied to those assets. These are the attributes of the producers unique competitive offering. Having SAP or any other accounting system, including People, Ideas & Objects, is not the basis of competitiveness of the producer firm. What we can do, and is the competitive offering of the Community of Independent Service Providers, is provide the producer with the most profitable means of oil and gas operations. That is to say that the system will not make a silk purse out of a sows ear, only that the most efficient means of operations will be attained by using People, Ideas & Objects and the CISP. 


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Collaboration Capabilities Innovation Value-Proposition

The China Syndrome

In a recent post we highlighted the EIA’s revised energy supply forecast. The chart from that post shows a 1 million barrel per day reduction in current production volumes. Econbrowser is now publishing anlysis of the EIA’s energy demand forecast, focusing on the impact that China will have in the marketplace. 

Providing the market with adequate energy supplies would be a difficult issue on its own. Adding the unprecedented demand expected from China, provides a real opportunity for the innovative oil and gas producer. The author of the econbrowser article, Stephen Kopits notes an interesting characteristic of energy demand.

Oil demand does not grow linearly with GDP. Rather, the bulk of oil demand growth occurs in the two decades during which societies typically acquire motor vehicles, after which per capita oil demand flattens. For example, per capita oil consumption in the United States is today lower than it was in 1979, even though per capita income has increased substantially since.

That is not to say that the U.S. demand for energy has dropped. The focus on motor vehicles alone, which is what Kopits reviews, would therefore limit the potential demand from China to just that form of consumption. If we are to gain an understanding of the volume of potential demand from China, motor vehicles will be a portion of that demand, but not the sole source of the demand increase. Now the scary part of the analysis. Comparing the per capita increases in energy use of Japan (1960 - 1973) and Korea (1976 - 1996) and using either of those trajectories in China’s situation shows...

In any event, without delving deeper, we might expect China's steady state demand for oil could prove not less than that of more advanced Asian nations. Based on the experience of Korea and Japan, China's current population would be expected to consume approximately 55 mbpd at steady state (when per capita consumption plateaus), or nearly 2/3 of current global oil production, were the supply available.

One might argue that this is an unreasonable amount of energy consumption. It imputes systemic gridlock throughout China, and therefore would define the upper limit of what is possible. Nonetheless the volume of energy demand will be substantial. In this next quotation Kopits argues that the EIA’s forecast demand is similarly too low.

By contrast, the EIA sees China's oil consumption at only 10 mbpd for 2015, a growth rate of approximately 2.7% from current levels, and at only 16 mbpd by 2030. Is this consistent with a country whose vehicle sales are up 56% in the first five months of the year? Where sales of Audi's are up 77% and those of BMW have doubled compared to the first five months of last year? Is China truly going to be satisfied, as the EIA would have it, with less than 1/5th of the per capita oil consumption of Korea in 2030, even though they should be similar by that time?

and

The differences in views about China's oil demand outlook have enormous policy implications. If the EIA is right, and China will forget how to grow, then pressures on the oil supply will be modest. On the other hand, if China is to develop like other countries in Asia, the pressure on the oil supply will be crushing, with oil shocks, recessions, and war all conceivable outcomes. The energy--as well as the economic and security--policy differences between the two scenarios are like night and day.

I don’t think it has to be that way. Call me an optimist but I think that whatever China, the U.S. and all others need in terms of energy, it is possible to supply them at prices that reflect that demand. The costs associated with the exploration and production will be substantially higher then what they are today. The easy stuff is gone, that is something that we can all agree on. The prices and volumes of production are unknown at this time, with demand growth from China, the oil and gas business has moved into a different era of operations. We know that a commodity like oil or gas is affected by the demand from China no matter where the source of production is. 


Today’s oil and gas firms, particularly the large Independents and International Oil Companies are having difficulty generating value. The cost structures have caught up to the commodities prices and the performance of these bureaucratic firms is diminishing rapidly. If we look forward to 2030 we can assume that the way these firms are managed today will be history. No one would establish a firm today to operate in the fashion of the bureaucracy in 2030. 


What we do know about 2030 is that the industry will be using advanced systems to manage their operations. It is also reasonable to assume that the Joint Operating Committee (JOC) will be the key organizational construct of the innovative producer. The use of both the technology and the JOC will be decided upon today. Approaching issues that are as broad in scope as the supply and demand of energy, that present this level of opportunity, can not be approached in the same old bureaucratic fashion. We need to pursue a definitive course of action, by developing the Draft Specification of People, Ideas & Objects. 


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's China Economics Energy IEA Leadership Organization Vision

Location, location, location.

As in the retail business, location is the key. With January 1, 2011 being the start date of the development of the Preliminary Specification. We need to consider the locations in which the People, Ideas & Objects operations will be based. Settling on which areas of operations helps to further define the “what” and “how” of the applications development. The choice of locations will also have influence on the many positions that will be available with People, Ideas & Objects.


The two areas we are able to settle the location are; the region for the developers and the location for the cloud computing infrastructure. Dealing with the computing infrastructure first, it has been decided that these resources will be based in Houston. Although the speed of light would limit the choice of location anywhere on earth, Houston provides several advantages. The primary reason is of course that Houston is the centre of the energy universe. Establishing a central location for the People,Ideas & Objects infrastructure and staffing is the second reasoning for choosing Houston. Whether it is supporting users and members of the Community of Independent Service Providers, Houston will be the base for these resources. The specific positions that are based in Houston include, the Chief Operating Officer, Vice-President Business Development, Vice-President Community Development, and Vice-President Infrastructure.


The development group is likewise constrained by the speed of light. Setting up a primary location for these resources needs to consider access to a large community of developers. That’s Silicon Valley. Recall we are Oracle customer. And when we consider the location of Oracle’s resources, headquartered in Redwood Shores California, Oracle has the majority of their development and technical resources available in Silicon Valley. These resources will be headed up by the Vice-President Development position noted here.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Community Development Organization

Economics as Astrology

Richard Fernandez is right. Talking about economics in his Belmont Club blog, Fernandez raises many valid points in this recent post. A frequent contributor to Pajamas Media, he is responding to Paul Krugman’s comment that now is the beginning of a Third Depression. Fernandez equates Krugman’s comments to astrologist Madame La Zonga, he has a valid point. When Nobel Prize economists suggest that more spending of borrowed money will save us, it is economic voodoo.

The fact that experts cannot settle on the proper prediction suggests the model they use can give rise to multiple or even contradictory predictions, like a compass needle that spins with alacrity of the second hand of an analog watch. The physicist Frank Tipler says that with a compass like that you should start worrying. He argued that since Nobel Prize economists could manifestly rise only to the level of predictive competence of astrology, they should exhibit the same modesty as Madame La Zonga.

People, Ideas & Objects could be accused of falling for, or prescribing the same economic voodoo. We have relied heavily on the analysis of Professor Carlota Perez in predicting the economic environment that we now find ourselves in. A key difference between Krugman and Perez’ commentary is that Perez is looking at the historical record and suggesting patterns that have occurred before, and that are systemic over time. She is not suggesting a formula for how the future will unfold, only that in certain situations, history shows these events occur with predictable regularity. Krugman on the other hand, believes his prescription is the only valid remedy.  



Up until June 1, 2010 we have focused on the academic aspects of this project. Now, in phase two, we are focused on commercializing the research that has been undertaken. In our defense I would assert that we are actively providing a solution to what we see as happening in oil and gas. We have suggested that the oil and gas firm may be economically challenged unless they changed their key organizational construct to the Joint Operating Committee (JOC). If we look at the example of Shell, who recently completed a comprehensive restructuring of their organization, yet, based on today’s energy prices, are unable to earn a profit on their overall operations. This same scenario is, and will be played out across the industry. An industry that I have accused of muddling through as opposed to actively invoking the changes prescribed by adopting the Draft Specification. Fernandez notes.

Leaving economic policy to common sense might actually be the safer course. Wikipedia described an experiment in the 1980s which suggested that because macroeconomic models performed so poorly, the best course was often to leave well enough alone and muddle through rather than relying on ‘activist’ or ‘visionary’ prescriptions.

People, Ideas & Objects is based on the vision as described in the Draft Specification. Taking the situation at Shell, a prescribed course of further muddling-through might resolve their lack of profitability. On the other hand, using People, Ideas & Objects vision of using the Joint Operating Committee provides an alternative designed to solve exactly that lack of profitability. What was once an economic prescription, that being People, Ideas & Objects vision, was “speculation” on one of many of the possible outcomes of the industry. That speculation has now become the solution to what the industry is ailing from. Some would call this prescient, I call it lucky.



There are those areas (macroeconomics) of the economics profession that equate well with the astrological practices of Madame La Zonga. There are however, other areas (microeconomics) of the economics profession that are fact based, such as specialization and the division of labor, these are the areas that People, Ideas & Objects have focused on providing value.  Our prescribed solution may yet prove to be voodoo, however, I wonder what Shell thinks.



Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Economics Organization Change

The Scope of the Application

In a recent post we talked about the scope of the development in terms of the Preliminary Specification. Today I want to discuss the scope of the application itself. It may seem that these are the same points, however, I think that there is enough of a difference to warrant this post.

To provide the innovative oil and gas producer with the software tools they need, the end user needs to be involved in the design and development of those systems. People, Ideas & Objects is focused on the end user in its developments. Organized around a comprehensive vision of how and what the systems consist of, the Draft Specification details the vision of the application. Organizing the user in these developments has been our priority throughout these developments. Anyone proposing the development of systems for innovative oil and gas producers would have to include the user in this manner. Yet People, Ideas & Objects is the only software developer that is focused on the user. Does SAP provide a comprehensive development of systems based on user input? Do the current bureaucracies believe the issues of the oil and gas industry can be solved without comprehensive user based software developments?


People, Ideas & Objects fills the traditional “ERP” or Enterprise Resource Planning classification of applications. It is a comprehensive solution designed to manage the operations of Joint Operating Committees and producers needs for accounting, administration and management. The Draft Specification defines the general framework of the application. It is anticipated that most, if not all, employees of a producer firm, the service sector and partners of Joint Operating Committees will have access to the application. The various disciplines that are employed in an oil and gas firm, geologists, engineers, landman, accountants and others are included in this definition.


In the People, Ideas & Objects software applications we seek to capture the ways and means of the optimal innovative oil and gas producer. The understanding of the industry is beyond the scope of a handful of contributors and involves the multiple disciplines noted earlier. The collaborative output of the application is well beyond the scope of one individuals understanding of the industry. Therefore clarification and compromise will be a necessary and difficult part of the process. Using advanced business techniques, focused on the conflicts and contradictions that arise, the output will resolve many of the issues within the industry and its application to the Draft Specification. This is a business design process that will involve literally everyone and anyone with experience and understanding of the oil and gas industry. More specifically it is a place where people can contribute their ideas and build their own service based offering in support of the innovative oil and gas producer and end users of the developing People, Ideas & Objects software.


Producer firms also have a critical role to fill in these developments. Their participation helps to define the applications scope of operations. Will the applications include the geographical regions of each area of operations of a producer firm? Will the applications include the types of oil and gas operations that the producer participates in. Without direct participation of the producers in funding and defining the scope of the application, the producer may or may not have all their regions and operations covered. This why the producer needs to participate in these developments now. With the Preliminary Specification set to start on January 1, 2011, and include the scope of the application, now is the time for producers to begin the process of supporting and participating in these developments.


Adding to the scope of the application is the market definitions of the producer firms targeted. The application is proposed to work for International Oil Companies (IOC’s), National Oil Companies (NOC’s), Independents and Start-ups. Using the Joint Operating Committee as the key organizational construct provides value for all producers in the industry. To preclude any market definition would unnecessarily limit the scope and value of the application. Joint Operating Committee’s include all types of producers. Producers need to participate in these communities and ensure their operations geographical and operational needs are met. If you have comprehensive operations, working within these communities at the onset provides real value.


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Collaboration Development Preliminary Management

McKinsey on Global Rebalancing

McKinsey have published an article that I think provides a good understanding of how our economy will be functioning in the near term. Entitled “Globalizations Critical Imbalances” it talks about the necessary adjustments in world trade and their implications. Coming from the point of view of the energy industry, I think this document shows the demand for energy will continue to increase substantially in the near term. Prices will be the means of allocating these finite energy resources and therefore the rewards to the innovative oil and gas producer will be substantial. McKinsey notes.

To some extent, the rebalancing of global economic activity from developed to emerging markets simply reflects economic laws of gravity. In a world where ideas can flow freely and countries are at different stages in adopting modern modes of production, communication, and distribution, less developed nations should grow more rapidly than their counterparts in the West as they catch up.

China, India, Brazil and others are providing substantial increases in the quality of life for their citizens. This naturally imputes greater volumes of energy will be consumed by these countries. Competition for energy resources will be extreme. How much of an increase in consumption and energy pricing is reflected in this next quotation.

The structural issue facing developed-world nations is that the amount of high-quality, high-productivity labor that will be mobilized over the next decade in Brazil, China, and India (not to mention Mexico, the Philippines, and Thailand) is likely to be measured in the hundreds of millions of people. By comparison, the entire US labor force comprises 150 million people. This is a wonderful trend for humankind and would be a boon for everyone in the world if emerging-market employment were directed largely toward production for domestic consumption. The challenge for developed-world governments and citizens seeking jobs, however, is that a significant fraction of this emerging-world labor displaces jobs that would otherwise be created in Europe, Japan, and the United States. This may be the underlying reason why unemployment in Europe, Japan, and the United States is becoming more structural rather than cyclical and may get worse over time no matter how much public stimulus is provided. Certainly, the job losses of the Great Recession look quite different from those of past recessions.

We are clearly not out of the woods in terms of the Great Recession. One of the best indicators of the world economies health has been the Baltic Dry Index. The costs to ship dry goods has fluctuated wildly during the last few years. Although the index has stabilized over the past few quarters, it remains substantially below the highs recorded prior to the beginning of the recession. (Note the recent decline in the index has been substantial.) McKinsey notes the difficult situation these global imbalances will cause various governments.

It is very difficult to say how these issues will play out. The global rebalancing that is needed is obvious: developed-world countries need to save more, consume less, become more fiscally disciplined, and run current-account surpluses (or at least be neutral). Emerging-world countries need to let their currencies rise until PPP rates are closer to financial-exchange rates. They need to consume more, save less, run current-account deficits (or at least be neutral), and continue investing, with some of the capital provided by outsiders. If major national governments work proactively together to rebalance and coordinate their fiscal, monetary, trade, and foreign-exchange policies, the adjustment process could be gradual.

The implications of this “rebalancing” may appear dire to those in the developed economies. I think the opportunities will be substantial and the challenges significant. Those that are able to innovate, and particularly the oil and gas producers, will realize many benefits. Realization that we are no longer in the “low cost” era of the energy industries past. Changing from this past mindset to one that can profit from these types of economic forces requires the changes that are contemplated in the Draft Specification.

The underlying global economic processes under way are very powerful, and the profit opportunities will be enormous as four billion people in emerging markets triple or quadruple their incomes and wealth over the next 20 years.

McKinsey are specific on how companies should position themselves for these changes. Oil and gas firms need to adopt these and other recommendations. It is foolhardy to think that these economic challenges and opportunities can be handled by the existing bureaucracies. Innovative oil and gas producers need to begin the process of addressing these opportunities by acquiring the software development capability of People, Ideas & Objects and begin the development of these software applications.

These suggestions represent specific applications of the more dynamic management approach I have urged companies to adopt in the past. The hallmarks of that approach—heightened awareness, greater resilience, more flexibility, and the timely alignment of leadership around needed adjustments—will be invaluable for companies as they navigate the choppy waters of global economic rebalancing. This process will continue and perhaps even accelerate in the years ahead, not despite, but because of the structural adjustments that are needed to put the global economy on a more sustainable trajectory.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's McKinsey Economics Change China Innovation Strategy