McKinsey are once again focusing on the impact that technology will have on organizations. This new article entitled “Clouds, Big Data and Smart Assets: Ten Tech-Enabled Business Trends to Watch” and sub-titled “Advancing technologies and their swift adoption are upending traditional business models. Senior executives need to think strategically about how to prepare their organizations for the challenging new environment.” For the past while I have been closing these blog posts with the comment that management are conflicted and will not make the necessary changes to financially support these developments. Here McKinsey is putting the decision to move to adopt these technologies at the foot of senior executives.
As the worlds premier consulting firm, McKinsey have added substantially to the discussion of applying technology to organizational change.
The ways information technologies are deployed are changing too, as new developments such as virtualization and cloud computing reallocate technology costs and usage patterns while creating new ways for individuals to consume goods and services and for entrepreneurs and enterprises to dream up viable business models.
Again, prospective users of People, Ideas & Objects, and members of the
Community of Independent Service Providers will be at the forefront of these major trends.
For senior executives, therefore, merely understanding the ten trends outlined here isn’t enough. They also need to think strategically about how to adapt management and organizational structures to meet these new demands.
1. Distributed co-creation moves into the mainstream.
Recall that we are working to detail “Phase Two” of this project. The purpose of Phase Two is to develop the
Preliminary Specification which is proposed to generate a system design consisting of 100 man-years of effort. These developments will be generated from one thousand or more contributors and the entire prospective user community reviewing and influencing the output. A design such as the Preliminary Specification, which of course has not been done before, has also never been possible before.
In the past few years, the ability to organize communities of Web participants to develop, market, and support products and services has moved from the margins of business practice to the mainstream.
Producers need to be a part of this process. Determining the geographical, functional and process scope of the application are part of the Preliminary Specifications deliverable. Ensuring that the specification addresses the producers needs is the responsibility of each producer.
The time for producers to begin their involvement in these communities and developments is now. With the Revenue Model providing significant financial incentives for early participation and the ability to influence the output of these developing communities, delays in a producers participation could be costly.
2. Making the network the organization.
Using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer is only possible as a result of the advanced networks and Information Technologies. Networks enable and facilitate the interactions between JOC partners and service providers.
We believe that the more porous, networked organizations of the future will need to organize work around critical tasks rather than molding it to constraints imposed by corporate structures.
Management orthodoxies still prevent most companies from leveraging talent beyond full-time employees who are tied to existing organizational structures. But adhering to these orthodoxies limits a company’s ability to tackle increasingly complex challenges.
As the research that has been conducted here at People, Ideas & Objects shows, the use of the Joint Operating Committee provides a solution to many of the key issues that the industry faces.
3. Collaboration at scale.
To suggest that the oil and gas industry is already engaged in a high level of collaboration would be an understatement. The Joint Operating Committee by its definition is a collaboration. These interactions have been conducted throughout the industry for many years. What is needed is for the Information Technology systems the industry uses to capture these collaborations and embed them within the ERP systems used in the industry. That is what People, Ideas & Objects is working to provide. By adopting the advanced IT infrastructure and enabling the collaborations to be handled through the technology, the industry will be able to scale their activity and innovations to the level necessary to meet the market demands for energy.
Despite such successes, many companies err in the belief that technology by itself will foster increased collaboration. For technology to be effective, organizations first need a better understanding of how knowledge work actually takes place. A good starting point is to map the informal pathways through which information travels, how employees interact, and where wasteful bottlenecks lie.
A process that is part of the work being proposed to be completed in the Preliminary Specification. Recall as well, that tacit knowledge, the understanding of how things get done, can not be captured. It exists only in the minds of the users, Community of Independent Service Providers and employees of the firms involved in oil and gas. What we can do is design and build the tools that enable the people in the industry to use their tacit knowledge.
4. The growing “Internet of Things”.
McKinsey highlighted their concept of the Internet of Things a few months ago. These concepts were covered in a
blog post that ties McKinsey concept to the People, Ideas & Objects Technical Vision.
5. Experimentation and big data.
Experimentation is the way in which innovation in oil and gas will expand the sciences. One of the keys to exploiting the experimentation and “big data” in the industry is the Joint Operating Committees operational decision making framework. When we align these organizational decision making processes to the systems used by the innovative firms, then we will be able to use these new and valuable tools.
Using experimentation and big data as essential components of management decision making requires new capabilities, as well as organizational and cultural change. Most companies are far from accessing all the available data. Some haven’t even mastered the technologies needed to capture and analyze the valuable information they can access.
We will address the remaining McKinsey technology trends in a future blog post. McKinsey close their paper with the following comment.
The pace of technology and business change will only accelerate, and the impact of the trends above will broaden and deepen. For some organizations, they will unlock significant competitive advantages; for others, dealing with the disruption they bring will be a major challenge. Our broad message is that organizations should incorporate an understanding of the trends into their strategic thinking to help identify new market opportunities, invent new ways of doing business, and compete with an ever-growing number of innovative rivals.
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 economic development has proven, reorganization would 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.
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