The Preliminary Specification Part XLIII (K&L Part III)

Throughout our discussion of the Research & Capabilities and Knowledge & Learning modules. We have been discussing the earth science and engineering research, developments, innovations and thinking of the oil and gas producer and the Joint Operating Committee. Many of you may be wondering what exactly does an ERP system have to do with these activities? Simply these activities are where the business of the oil and gas business are being conducted. It is imperative that the systems that manage the commercial aspects of the firm support the people and activities that occur in these areas. This post will hopefully convince you of this.

Up to this point in our discussion we have only discussed the activities of the modules from the point of view of engineers and geologists. As we peel this onion known as the Preliminary Specification we will begin to see the commercial end of the Research & Capabilities and Knowledge & Learning modules. We began to see a bit of it yesterday with the re-introduction of Dynamic Transaction Costs. With these costs being incurred, a means to enable them and control them should be provided as a mechanism in the Knowledge & Learning module. Therefore the ability to issue Work Orders, budget and effective cost control would be part of the modules functionality. Also project management tools that are able to source from the Resource Marketplace module and use the Military Command & Control Metaphor are necessary to project manage the new idea or run the experiment.

The final look and feel of these two modules will ultimately be the result of the user input and their involvement. The point that I am trying to make in this post is that these modules are where the business of the oil and gas business are happening. It should be within these modules that the engineer or geologist should never have to leave. If they find an interesting idea within the research area of the Research & Capabilities module they should have the opportunity to right click their mouse to have a list of options to prepare a Work Order, Prepare a Budget, or Resource a Project. The ultimate list of options would include the supporting activities of a user defined commercially focused ERP system.

Today there are significant financial resources available for innovation. The commodity price increases are a reallocation of capital to fuel innovation. The reorganization of a producer to facilitate innovation is the purpose behind the research that People, Ideas & Objects conducted. That research was the basis of the Draft Specification of which the Research & Capabilities and Knowledge & Learning modules are part of. These modules are the two key points where innovation occurs. Within these modules there is a flow of ideas from the service and oil & gas industries through to the producer firm, and then that knowledge is then sent to the Joint Operating Committee where it is applied and specific learning occurs.

The People, Ideas & Objects application modules are a critical part of how these ideas are aggregated, filtered and parsed. From having a free flowing, post your ideas on an industry wide publication, to generating funding for those ideas, to developing commercial products and services, to enhancing and developing internal capabilities, to focusing the right people on the right knowledge, and enabling them to learn from what is not known. This process is managed through these two modules.

There will be a lot of ideas and there will be a lot of money spent in the coming decades. Successful innovation is not cheap. Unsuccessful innovation is terribly expensive. If anyone can tell me the difference as to why Apple’s iPad is commercially successful and HP’s Touchpad lasted only seven weeks; probably has an idea as to the secret to successful innovation. The only way to participate is to get in the game. And understand that the areas that we will innovate in are not limited to any corner of the industry. We have focused on the key business of the oil and gas business. But just like People, Ideas & Objects is focused on the organizational innovations and systems developments, there are other areas where innovations will be needed to be funded and deployed in oil and gas.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XLII (K&L Part II)

The title of the Preliminary Research Report was “Plurality Should Not Be Assumed Without Necessity”. This being of course Occam’s Razor which in its simplest form means - the simplest explanation is most likely the correct one. Very appropriate when we are talking about using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. However, I also noted in the Preliminary Research Report that Occam’s Razor was referenced as “Its not what you know that you do not know that hurts you. Its what you do not know, that you do not know that will. It must be considered that there is nothing more difficult to carryout, nor more doubtful of success, nor more dangerous to handle, than to bring about a new order of things.” Knoop & Valor (1997).

Imagine we are now in the Joint Operating Committee with full operational decision rights with respect to the course of action to take. Thanks to the work that is done at the producer firms we know what we know from their work in the Research & Capabilities modules. That information and data is populated in the Knowledge area of the Knowledge & Learning module. Now the rubber hits the road sort of speak and the theory comes to practice.

Through the process of elimination, it is at this point that only the substantial ideas are left standing. Those that are still functioning on paper and have not been refuted or proven false through the normal vetting process. If these ideas were the beginning of new products, services or innovations these would probably have begun their early stages of commercialization. The point being that the Learning aspects of the Knowledge & Learning module are where the innovative aspects of the oil and gas producer are learned. By that we are not turning the property into a science experiment, only considering what is known and what is unknown.

Once again we turn to Professor Richard Langlois for guidance. In his definition of “Dynamic Transaction Costs” he notes.

Over time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost - the cost of transferring the firm's capabilities to the market or vice-verse. These "dynamic" governance costs are the costs of persuading, negotiating and coordinating with, and teaching others. They arise in the face of change, notably technological and organizational innovation. In effect, they are the costs of not having the capabilities you need when you need them. p. 99

As everyone with any experience knows learning is costly. These costs are well captured and identified in Langlois definition of Dynamic Transaction Costs. It is reasonable to assume that these and failure are the two primary costs of innovation. The alternative is that nothing is done and that is always an option. However, as has been suggested in People, Ideas & Objects research before, the commodity price change is a “technological paradigm” that is financing innovation.

What I intend that to mean, and what the research imputes that to mean is very simple. That to stand still is to lose. We see in many producers today the costs of production has increased as quickly, and in many cases quicker then the prices of the commodities. Profits in some companies are quite healthy however, as an industry we don’t see windfall profits being earned from price increases that are in the area of 500% over the past 8 years. I think the ability to innovate will not only permit the oil and gas producer to find more oil and gas, increase the production of oil and gas from a field, but will also provide innovative ways in which to deploy its capital and reduce its costs. These are the domain of the Joint Operating Committee and these are the areas in which it can learn to do things in a more innovative manner.

As we explore the Preliminary Specification of the Knowledge & Learning module we will see how innovation is supported at the Joint Operating Committee. For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part XLI (K&L Part I)

We now move onto the Joint Operating Committee focused Knowledge & Learning module of the Preliminary Specification. This module shares many similarities to the Research & Capabilities module, and in fact is populated with the information from that module as its base of information. Recall that the objective that we are working to achieve is to move the knowledge to where the decision rights are held.

As I noted in yesterday’s post, the Research & Capabilities module should be organized based on geologic zones. This is so that the information that is pertinent to each zone can be separated into its own “packaging” within the Knowledge & Learning module. Additional ways in which data may be sorted in the Research & Capabilities module might include by geographical location. Where all the vendors who operate within a certain geographical location are referenced only in those regions.

With each Joint Operating Committee being concerned with one or a handful of geologic zones. The focus of the Joint Operating Committee can be limited to just those specific areas. What is particularly different about the Knowledge & Learning module, however, is that the information that is contained within the module is aggregated from multiple producers. Any of the producer participants who have information contained within their Research & Capabilities module will have that data and information for those geologic zones populate the Knowledge & Learning module for that Joint Operating Committee.

With the potential to have multiple companies contributions of research and capabilities about that zone. It is important to have the information organized within the Research & Capabilities modules in a manner that when multiple producers data is merged, use of the data is probable. (The old adage garbage in, garbage out.)

This would summarize the manner in which the Research & Capabilities information is populated within the “knowledge” area of the Knowledge & Learning module. Tomorrow the “learning” attributes of the module will be discussed. And on Saturday, I will discuss why we are even talking about these geo-technical and engineering points in an ERP system.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XL (R&C Part VIII)

To finish up our first run through the Research & Capabilities module, there are a few minor points to put across. As with all the modules, we will return to our review of the Research & Capabilities to look deeper into the functions and processes of the Preliminary Specification. One minor point is that it would be logical to organize the information contained within this module by geologic zone.

One of the key points about the use of this module is that the oil and gas producers receive 100% of the funds from the production of oil and gas. This entitles them to be the gate keeper on all subsequent activity with respect to how that money is expended. And that includes the “what” and “how” of service industry product and service innovations and offerings. In today’s capital markets little is tolerated for research and development that is not directly funded by customers. To expect that the service industry will divert its profits, or will raise capital to fund its research and development efforts is foolish. It is clear that there has to be a direct link between the research that is undertaken by the service industry and the customers (the producers) wallet.

At the same time producers don’t want to participate when the cash is simply thrown against the wall to see if it will stick. There has to be a clear direction and understanding given to the service industry as to the direction and need that the oil and gas industry has. For the past few years, at least in Canada, we have heard many of the independent producers calling out the service industry as greedy and lazy and taking advantage of the situation in the field. Implying that the demand for service in the field is so strong that the only means to control it is for the service companies to increase the prices they charge. I see this situation occurring as a result of a lack of investment in innovation by the service industry.

This situation in the field has led to “cost control” measures by the producers that have further constrained the communications between the service industry and the producers. To suggest that the industry should be funding service industry innovations is the last thing that producers want to hear at this time. But it is the long term solution to producer problems. Micro-managing and cost-controlling will get the job done to the satisfaction of no one. As the demands in the industry increase, the ability to increase the capacity and capabilities will be further constrained because no one is working on those capacity related problems today. When the time comes, the problems of today will be even significantly larger tomorrow.

What is needed is the Research & Capabilities module of the People, Ideas & Objects application to provide the communication between the service industry, the entrepreneurs and the oil and gas producers. Communication about the needs of the producers, backed up with dollars that are willingly spent in order to develop the innovation, capacity, service or product. Providing direction to the service industry certainly sounds more constructive then calling names, controlling costs or micro-managing.

Tomorrow we will begin our review of the counter part to the Research & Capabilities module, the Knowledge & Learning module. This module is for the Joint Operating Committee itself and is similar in nature to the Research & Capabilities.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part XXXIX (R&C Part VII)

So far in our review of the Preliminary Specifications Research & Capabilities module we have touched on how the module helps the user analyze the business from the long term perspective. Adding value by managing the transition from the hierarchy to the aligned organization under the People, Ideas & Objects software application modules. Today we want to discuss the additional perspective of viewing the marketplace of the service industry itself, and how value is developed through the interfaces of the Research & Capabilities module. With this post we want to focus on the service industry and how the user of the Research & Capabilities module initiates the development of new and innovative products and services.

They say that need is the mother of all invention. As we have discussed before the user of the Research & Capabilities module is predominately a senior individual within the producer firm who rose through the ranks from engineering or geology. And therefore knows the industry well and the characteristics of the producer itself intimately. Within the Research area of the module the user is able to review the “ideas” that are being generated in the marketplace of the service industry vendors. These ideas are the bases of claims to copyright law and patent filings by their originator, and are published in blog like format through the service industries access to the Research & Capabilities module.

There is nothing precluding a producer from participating from posting ideas to the marketplace. Its possible that they could engage in licensing arrangements with service providers to sell products and services based on their ideas. However, that is not really the business of the oil and gas producer. Competing on the basis of a better drill bit or packer is not going to provide them with any greater opportunity to further their business. The ideas to extend the product or service requires the full scope of the oil and gas industry to participate as customers for the ideas and technologies in order for the technology to be proven, commercialized and to bring value to all the producers in the industry.

Competing on the basis of ideas is the only method that the oil and gas industry will move forward to solve the difficult problems of providing the market demands for energy. No one will do the hard work needed to solve the difficult problems if their ideas are going to be taken by someone who will in “me too” fashion just steal them and commercialize them and ignore the developer of the ideas. The oil and gas industry has to understand this and respect the rights of the person who develops the idea. That these idea generators are the keys to the long term prospects of the industry. If people see that the industry will respect an idea, then they will know that they can risk everything on the chance that it may work out, and if it does, they will earn the benefits of it. If they find that the industry quietly shrugs its shoulders and says “oh well” so and so got scooped on their invention, too bad. Then they will continue on in much of the same fashion they are today. What industry needs to do is respect the inventor and deal only with them. By doing so, and as a result, they will find the market will flood with new ideas, products and services.

The Research & Capabilities module is a window on the activities in the service industry. An opportunity to peer into the research that everyone is doing. Publication of the ideas is how you earn the copyright. Therefore by using the Research & Capabilities module the developer of the ideas is earning the copyright on the ideas and securing their rights. From there they should be able to solicit interested producers to help fund the further development of the product or service and move the development of it along faster to market.

Lastly the Research & Capabilities is a marketplace module that provides for collaborative interactions. This marketplace will reflect producers expressing needs and entrepreneurs trying to solve problems. It joins the other marketplace modules, the Petroleum Lease, Resource and Finance Marketplaces where people will be spending more of their time and energy working in the future. As our phones continue to record transactions and conduct other “things” that we used to call work. It is these interactions that are the areas where the real value is generated. And are the areas that computers can’t do.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part XXXVIII (R&C Part VI)

What evidence do we have that the transition from the way things are done today, to what is suggested in the People, Ideas & Objects Draft Specifications Research & Capabilities module is valid? For the majority of producers it is a bit of a stretch that they will reorganize their firms in such a manner that will allow any “leakage” of proprietary capabilities from either the firm or the Joint Operating Committee. And that the parsing of the short and long term perspective across the JOC and the firm in the manner that has been discussed in these blog posts. It certainly will take some convincing in order to accept. And here I thought that “trust me” might work.

First of all this intuitively makes sense. From the Joint Operating Committee alignment of all the frameworks to having them focus on performance as the driving motivation. This also begins to make sense when we have the Joint Operating Committee pursuing the optimal short term horizon. Making the operational decisions based on the collaborative understanding of the partnership that makes up the Joint Operating Committee. And the producer firm undertaking the long term horizon of the firm by interacting with the Joint Operating Committee, the remainder of the industry and the service industry to build the needed earth science and engineering capabilities needed for the firm. However, as possibly the strongest and easiest evidence that I can provide that this is substantially correct is this quotation from Professor Richard Langlois.

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 9

It is difficult for me to determine who, Professor Richard Langlois or Professor Giovanni Dosi, is the most influential in terms of the research that has been undertaken by People, Ideas & Objects. If the above quotation is inadequate to provide you with satisfactory evidence then I suggest that you review the papers of Professor Langlois, as we have in these 56 blog posts. His is a focus on organizational capabilities, and has provided us with sound direction in developing the Draft Specification.

To be specific, what we are doing in the Research & Capabilities module is “moving the knowledge to those with the decision rights”. And this is where the alignment under People, Ideas & Objects begins. What the bureaucracy is trying to do is “moving the decision rights to those with the knowledge”. And that is where the conflict is being created.

But more important then that, is that we have a sub-title for the Research & Capabilities module, and that is “How to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective.”

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXVII (R&C Part V)

Yesterday we talked about the role the producer would have in determining the long term horizon of the firm. How the Research & Capabilities module would provide a window on the various Joint Operating Committees to provide the ability to apply systemic earth science and engineering innovations at each JOC with out the risks of unnecessary duplications or repeated following of blind bunny trails. Today I want to discuss the risks and rewards of the leakage of earth science and engineering information from the firm through the Research & Capabilities module. As it would be apparent that the level of discussion and collaboration through the partnerships in the Joint Operating Committees, through the industry itself and the service industry in particular would lead to significant leakage of the producers proprietary earth science and engineering knowledge, understanding and capabilities.

In the Preliminary Research Report we learned an interesting point about the producers proprietary earth science and engineering knowledge, understanding and capabilities.

In Brown & Duguid (1998) they make the following observations: “The leakiness of knowledge out of and into organizations, however, presents an interesting contrast to internal stickiness. Knowledge often travels more easily between organizations than it does within them. For while the division of labor erects boundaries within firms, it also produces extended communities that lie across the external boundaries of the firms. Moving knowledge among groups with similar practices and overlapping membership can thus sometimes be relatively easy compared to the difficulty in moving it among heterogeneous groups within the firm. Similar practice in a common field can allow ideas to flow. Indeed, it’s often harder to stop ideas spreading then to spread them.” (p. 102) p. 32

We all know this leakage of information to be inherently true. When someone discovers something that is “news” within the industry, it is generally well known within industry associations for the geologists or engineers as soon as it is known in the firm. It is either imputed through what is known, or the leakiness is as porous as it is. What is a producer firm to do to ensure that the information they have does not leak. I think that the point lies in the meaning of “capabilities”; which is “an aptitude that can be developed”. Simply it is not possible to stop the leakage. The question therefore becomes, is it best to develop your aptitude by curling up with a text book or to participate in a marketplace.

According to McKinsey the solution requires...

... a company must develop organizational overlays in the form of markets and networks that help its professionals work horizontally across its whole extent. These overlays make it easier for them to exchange knowledge, to find and collaborate with other professionals, and to develop communities that create intangible assets.

These tacit interactions are what are captured in the “Research” area of the Research & Capabilities module. Interaction with the larger communities to develop the knowledge and understanding around the science of oil and gas not only expands the capabilities of the producer firm but will also expand the overall science. We learned two other important points regarding innovation in the Preliminary Research Report.

1. That new science fuels new innovations, and new innovations fuel new science.
2. Technical trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms.

People, Ideas & Objects research assumes that one technical trade-off in oil and gas is accurately reflected in the oil and gas commodity pricing. That these prices are providing the resources to fuel innovative oil and gas producers. Therefore the faster we iterate on the science and innovation, the more appropriate a producers strategy should be focused on a capabilities approach.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXVI (R&C Part IV)

If we reduce the business of the oil and gas producer down to the activities of the Joint Operating Committee. And concern ourselves only with the day to day activities of the property then we can generally be satisfied that we will know where our next meal will come from. But what about everything else. This is the classic conflict that a business must satisfy, the struggle between the long and short term horizon of the business. How much should be sacrificed in the long term and how much should be sacrificed in the short term. It should be noted that the name of the module is Research & Capabilities, this blog post focuses on the capabilities component of the module.

What is the firm capable of and how can that capability be enhanced? And more importantly since we are so dependent on our partners in the Joint Operating Committee and the service industry how is this apparent contradiction resolved? The traditional steps of the producer was to build the in-house capability. The assumption that is used in People, Ideas & Objects is that the resource constraints do not permit the luxury of each producer building these capabilities. The need to collaborate with partners to build the capabilities needed for the Joint Operating Committee is how these needs are met.

But we are talking about more then just the capabilities that each Joint Operating Committee demands when we are talking about the capabilities of the producer firm and the use of the Research & Capabilities module. McKinsey put it well in this quotation.

Ongoing multi-year tasks such as launching new products, building new businesses, or fundamentally redesigning a company's technology platform usually call for small groups of full-time, focused professionals with the freedom "to wander the woods," discovering new, winning value propositions by trial and error and deductive tinkering.

We have detailed that the focus of the producer firm is on its asset base and its earth science and engineering capabilities. This area of focus of the Research & Capabilities module is therefore a key focus of the producer organization. We are not talking about the people that will be deployed in the day to day of the various Joint Operating Committees. These are the core scientists of the firm.

We discovered something very interesting in our research. When we deploy teams of people in a fashion like we are with People, Ideas & Objects use of the Joint Operating Committee. The earth science and engineering capabilities of each Joint Operating Committee will atrophy. They need to be fed a constant stream of new and innovative ideas and possibilities to remain “current” with the science. This of course has to be steered by the mother ship so as to not duplicate errors or replicate blind bunny trails unnecessarily in each and every Joint Operating Committee.

Now it may seem that I have contradicted myself by stating that the firm needs to develop the capabilities necessary “in-house”. But I didn't say that. The Research & Capabilities module should be considered to be from an industry perspective. That although each firm will have specific people defined to support each firms needed capabilities, the service industry will take on a greater role in providing much of the innovative capabilities that are developed through the mindset employed by the producer firms.

Lastly I would want to talk about the scope of the Research & Capabilities module. Although it would have specific application in the earth science and engineering areas it should be used in other areas to build capabilities in other areas of the oil and gas business. One area that I would think would build value would be for producers to sponsor the development of People, Ideas & Objects software development itself. Just a thought.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXV (R&C Part III)

In our last post we went through the four points from the McKinsey article as to why we should use the Research & Capabilities module for the long term perspective of the innovative oil and gas producer. In this post I want to revisit the first point of that article and highlight the significance of the opportunity that is presented by separating the long term perspective into the Research & Capabilities module, and the day to day into the Knowledge & Learning module. In the McKinsey article it is noted;

The first design principle is to clarify the reporting relationships, accountability, and responsibilities of the line managers, who make good on a company's earnings targets, for all other considerations will get short shrift until short term expectations are met.

By making the Joint Operating Committee the key organizational construct of the innovative oil and gas producer. By aligning the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee with the compliance and governance frameworks of the hierarchy. By providing an extension of the governance structure over the partnership with the Military Command & Control Metaphor. We have isolated the Joint Operating Committee as the day to day operation of the oil and gas producer. This frees up the remaining portion of the producer to concern itself with the long term value generation of the firm.

Recall in the last post that these Joint Operating Committee’s are autonomous in the sense that they are focused on providing the greatest performance. They are driven through the Performance Evaluation module that allows them to determine where and how they can build the greatest value each month. Because they are operated by the partnership, which is motivated equally by financially gain, the producers will have faith that the “line managers will make good on a companies earnings targets.”

The Research & Capabilities module is looking at the interests the producer has in any number of Joint Operating Committees. This number may total into the thousands. To concern themselves with the operational performance of each would be a daunting and impossible task. And based on the previous paragraph their involvement is limited. However, there may be systemic corporate similarities that can be applied to each that bring value to the overall producer firm. Systemic similarities that can only be seen from the perspective of the firm, and in the long term. These are where the business value can be generated through the use of the Research & Capabilities module. McKinsey notes;

Dynamic management and improved collaboration, as we show later, are better ways of accomplishing the purposes of these ad-hoc structures. A company that aims to streamline its line management structures should create an effective enterprise wide governance mechanism for decisions that cross them, such as the choices involved in managing shared IT costs.

It is through an iterative and collaborative approach to dealing with the various Joint Operating Committees that the users of the Research & Capabilities module is able to extract the value in the long term. By passing on new innovations or experiments for the JOC to try. The ability to influence any and all variables and to see any aspect of the firm and to analyze it is the domain of this application module. To define it as a set of fixed functionality will ultimately be the result of what the user community is able to provide, however, I am certain that they will also recommend that the application module remain open to analyzing any and all data.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXIV (R&C Part II)

Yesterday we discussed how the Research & Capabilities module would be used to help build value by managing the transition from the hierarchy to the aligned producer organization under the People, Ideas & Objects software. Where the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee were aligned with the hierarchies compliance and governance. Making this transition will create opportunities for people to make changes to the work that they do in order to be more efficient and effective. What and how the software will do this little bit of magic is best described in a McKinsey article that is referenced in the Draft Specification.

In a four part recommendation McKinsey sets out in broad strokes what is required.

• Streamlining and simplifying vertical and line management structures by discarding failed matrix and ad hoc approaches and narrowing the scope of the line manager's role to the creation of current earnings.

The process of using People, Ideas & Objects software will achieve all of these objectives. By aligning all of the Joint Operating Committee and the hierarchies frameworks, imposing the military chain of command and having the financial interests of the producers drive the management of the Joint Operating Committee we are “narrowing the scope of the line manager’s role to the creation of current earnings”. These are the focus of the Partnership Accounting, Accounting Voucher, Petroleum Lease Marketplace and Performance Evaluation modules.

• Deploying off-line teams to discover new wealth-creating opportunities while using a dynamic management process to resolve short and long term trade offs.

These are the critical new roles that are being discussed in these “new” modules “Research & Capabilities” and “Knowledge & Learning”. Providing valuable insight to their users about the business that is above the day to day noise. Where the long term vision of the organization can be set, executed and realized through these two advanced software modules.

• Developing knowledge marketplaces, talent marketplaces, and formal networks to stimulate the creation and exchange of intangibles.

Within the Preliminary Specification, if we include the Research & Capabilities and Knowledge & Learning marketplace definitions, we have five marketplace modules in People, Ideas & Objects. Marketplaces are things that people will be doing more of in terms of participation in the future. Computers can assist, but again are generally very poor at making decisions, bargaining, knowing what to do, etc. The other three marketplace modules in the Preliminary Specification include the Petroleum Lease, Resource and Financial Marketplaces.

• Relying on measurements of performance rather than supervision to get the most from self directed professionals.

We have already had our first pass through the Performance Evaluation and Analytics & Statistics modules. Handing the Performance Evaluation module to the team that is running the Joint Operating Committee will enable them to manage the property in the best possible fashion. They are going to be able to figure out what it is that makes the most sense in terms of value, and begin to generate more of it. It is as simple as that. Except it is a very complex business. And that’s why you have your best earth science and engineering staff on the job. And the best business / geological / engineering minds running the Research & Capabilities module.

It should be coming clearer that it is no longer the 20th century. That to manage an enterprise requires a different approach, and the first thing that is needed to manage that enterprise is the software to enable that approach. With real shortages in the quality human resources necessary to maintain the markets demand for energy, it will be the producer that is able to maintain a high performing organization based on criteria such as these.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.