This is a follow on to the posting of Professor Langlois' recent article "
Organizing the Electronic Century". This article was written in August 1999 and contains several valuable ideas. Let me point out first that the topic is something I have discussed in this blog before. Going back to 1984's Dr. Anthony Giddens Constitution of Society" ISBN
0520057287 he notes that people society and organizations move together or there is failure. And Professor Wanda Orlikowski's Model of Structuration notes that technology is part of society. To read the details of these theories in this context please see me previous
post. This post may be the longest post that I have made. I would encourage you to read it in its entirety, there are many valuable points and ideas that are documented here.
Introduction
What I have proposed in this project is a system that is designed to operate an industry. Not one that is limited to operate just within a company. The Joint Operating Committee (JOC) by definition dictates this different perspective in order to operate between its member firms. This is a system in which the user is a consultant, an employee of a firm, or member of one the many service companies operating within the industry. In other words anyone who is employed in the energy industry. A tough prospect, and lets not forget a system that implements changes in the ways of life of most of these people mentioned. How could this possibly function as intended? The scope of the application notes the interactions between partners are as dynamic as the industry itself.
I have noted
here a technological vision that includes Wireless, IPv6, Java and Asynchronous Process Management. These technologies not only allow the industry to achieve these overall system objectives, they guarantee it. And that is the inherent threat of ignoring these technologies. Although technical risk is part of any software development, the risks associated to this project are mitigated through many new and effective tools, like modularity. Modularity is an important component in dealing with change and complexity and the difficulties they involve.
Professor Richard N. Langlois writes about the elements of "Modularity" with the organization as the primary focus. I will take these theories, apply them to my understanding of oil and gas, and then layer the technologies and how they could be involved in mitigating these risks.
"Modularity is a very general set of principles for managing complexity. By breaking up a complex system into discrete pieces - which can then communicate with one another only through standardized interfaces within a standardized architecture - one can eliminate what would otherwise be an unmanageable spaghetti tangle of systemic interconnections." p. 1
"What is new is the application of the idea of modularity not only to technological design but also to organizational design. Sanchez and Mahoney (1996) go so far as to assert that modularity in the design of products leads to - or at least ought to lead to modularity in the design of the organizations that produce such products." p. 1
Modular design of products can lead to the modular design of organizations is highly consistent with my "SAP is the Bureaucracy" thinking. Systems support, and therefore, define organizational structures. This comment by Langlois seems to intimate the same result of the alignment of systems.
"Why are some (modular) social units governed by the architecture of the organization and some governed by the larger architecture of the market?" p. 2
And lastly Langlois asks why modularity is sometimes seen in the market, and sometimes within the firm. Since we are seeking the boundaries of the firm, we are interested in Modularity in both the market and the firm. Langlois provides an excellent example of modularity's benefits in the following watch maker analogy.
Modularity and Complexity
"Tempus and Hora both make complicated watch-systems from myriad parts, and both are interrupted frequently in their work. Tempus does not design his watches as decomposable systems, so every time he is interrupted and forced to set aside his work, the entire unfinished assembly falls to pieces. By contrast, Hora first builds stable sub-assemblies that he can then put together in hierarchic fashion into larger stable sub-assemblies. Thus, when Hora is interrupted, only the last unfinished sub-assembly falls apart, preserving most of his earlier work. In an evolutionary selection environment, such stability would be be rewarded with survival (Simon 1962 [1981, pp. 200 - 205])." p. 4
"In the end, however, what makes Tempus's unfinished watches unstable is not the sheer number of distinct parts involved. Rather, it is the interdependency among the parts in his design that cause the watches to fall apart." p. 4
"In organizational and social systems - and perhaps even in mechanical ones as well - it is possible to think of interdependency and interaction among the parts as a matter of information transmission or communication." p. 5
In the system description I have proposed, I have described the
Petroleum Lease Marketplace, or PLM. The PLM is a Database of the Crown and Freehold leases that are available and issued in a certain geographical region. The PLM will provide access to the leases ownership, royalty obligation and other information that is publicly available. A producer looking for a new partner, lease, or deal could engage other producers within the PLM and have their business relationships recognized in this virtual marketplace. A marketplace where like minded producers, investors and land holders meet to exchange ideas and build relationships that generate oil and gas deals and activity. From within the PLM the details of the prospect would be populated to those producers that shared some common interests. Ultimately, in time these collaborations could lead to a meeting of the minds and facilitate the inevitable agreement, operating and accounting procedures. These items that were negotiated, and the attributes would contribute to forming the initial data elements that will go on to drive other modules within the overall Genesys system.
How can modularity help in this example? Langlois states interdependency and standards are critical components of modularity. With these PLM based transactions we are able to review standard data elements, standard operating and accounting procedures, standards in how the governments issue information. We can also see how these interactions could be carried out. Each producer enters the PLM with only a desire to expand the drilling and production prospects of his firm. The flexibility and modularity of the PLM provides the producers with the system that will document and provide the support necessary to facilitate and complete the transactions as they are conceived by the disparate participants. Once there, the producers are afforded a variety of opportunities that can be codified and begin the documentation process of their deal. Ultimately in a fully operational system, these data elements would provide the necessary transaction processing I have detailed in the
Partnership Accounting module.
Langlois now turns to the technology to explain how the modularity of the system can be captured and managed. His use of hardware and software provide strong analogies, and I am concerned that I may hop down a technological bunny trail if I am not careful. Therefore let me note the points that Langlois states, and point the reader to the
Java Programming Language for the implementation of this modularity. It is a fundamental underlying concept of the programming language and I will write another specific post to deal with Langlois modularity theories and the technologies.
"At one point, Brooks briefly considers a "radical" alternative proposed by D.L. Parnas, whose "thesis is that the programmer is most effective if shielded from, rather than exposed to the details of construction of system parts other than his own" (Brooks 1975, p. 78). This radical alternative is in fact the strategy of seeking decomposability in the design of the development project and of the underlying software. Parnas (1972) is the inventor of the notion of information hiding, a key concept in the modern object-oriented [Java] approach to computer programming. Programmers had long understood the importance of modularity, that is, of breaking programs into manageable pieces." (Parnas 1972, p. 1056)." p. 6
"Recently, Baldwin and Clark (1997, p. 86) have drawn on similar ideas from computer science to formulate some general principles of modular systems design. The decomposition of a system into modules, they argue, should involve the partitioning of information into visible design rules and hidden design parameters. The visible design rules (or visible information consists of three parts. p. 7
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An architecture specifies what modules will be part of the system and what their function will be.
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Interfaces describe in detail how the modules will interact, including how they fit together and communicate.
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And standards test a modules conformity to design rules and measure the modules performance relative to other modules.
These visible pieces of information need to be widely shared and communicated. But contrast, the hidden design parameters are encapsulated within the modules, and they need not (indeed, should not) be communicated beyond the boundaries of the module." p. 7
Design Processes
Is modularity good for all types of systems and developments? How about Oil and Gas in particular, with a high level of change and in demand as quickly as possible? Is this even a worthwhile objective of systems development? Or would the industry be better off to build a highly interconnected system? Here Langlois makes note of the following;
As usual, however, there is no free lunch. It turns out that modular systems are much more difficult to design than comparable interconnected systems. The designers of modular systems must know a great deal about the inner workings of the overall product or process in order to develop the visible design rules necessary to make the modules function as a whole. they have to specify those rules in advance. And while designs at the modular level are proceeding independently, it may seem that all is going well; problems with incomplete or imperfect modularization tend to appear only when the modules come together and work poorly as an integrated whole (Baldwin and Clark 1997, p. 86)." p. 8
"Under some circumstances, the benefits of modularization may not be worth the cost. For example, a system whose environment never changes may not have to worry much about modularization: Tempus will do as well as Hora if neither is ever interrupted. Systems that develop slowly in slowly changing environments may not acquire, or require, much modularity." p. 8
Makes a lot of sense to me. If I would be as bold to suggest this is also why the majority of the ERP software applications operating in oil and gas fail. Taking the entire industry from a scope and scale basis requires significant application development. The ability of the industry to integrate disparate modules form different vendors, and have them operational in the firm is a large task and difficult to do. The ability to mash these systems into one cohesive ERP style of application have been attempted many times and in many different ways before. The interconnectedness problems originating from the inability of the vendors to standardize on the requirements, data elements and processes. What the industry truly needs is a single vendor solution that addresses the scope and scale of the industry in a modular fashion. One that adopts the industry standards, such as those established through Public Producer Data Model (PPDM), Canadian Association of Petroleum Landman (CAPL), and Petroleum Accountants Society of Canada (PASC) and others. And through a dedicated solutions provider, such as what is discussed and proposed here in this blog, and focused around the JOC. Only then can these associated issues of interconnectedness vs. modularity be addressed.
Encapsulation boundaries.
"In a world of change, modularity is generally worth the costs. The real issue is normally not whether to be modular but how to be modular." p. 11
I can't think of a better reason to employ the one vendor focus, such as is described here. The multi vendor approach to building interconnected system in oil and gas has failed, in any manner of criteria. Langlois' analogy is precisely on point.
"We would think it odd indeed to assign two interior designers each half of a room (von Hippel 1990, p. 410). It makes a good deal more sense either to give each designer a whole room or to give up encapsulation entirely and let the two designers communicate extensively." p. 11
The traditional separation of Production Accounting from Financial Accounting modules by different software vendors is as laughable as the output from the two interior designers being assigned half of a room. One vendor pointing to the other vendors is the favorite game when problems arise. With the oil and gas industry being somewhat stable in terms of change, the vendor finger pointing was tolerable. Now with a dynamic demand rewarding the most innovative, change is the order of the day. How will this vendor strategy fair in this current and future environment?
"For example, the tasks in an innovative development project cannot be partitioned in advance, since knowledge is continually changing. In such a case, the modularization of the system (the development project) has to change continually; moreover the modularization at any point has to take into account the inevitability of re-modularization as learning takes place." p. 11
Social Institutions and Modularity.
Picking up again with the works of
Giddens and Orlikowski structuration theory, and a model of technological structuration. What strikes me as being particularly on target here is the discussion around adaptability. Recall also that Sun Microsystems CEO Jonathon Schwartz has written on the positive attributes of
adaptability.
Dr. Wanda Orlikowski built upon the Theory of Structuration when she defined her Model of Structuration for Technology. Dr. Orlikowski's model asserts that a fundamental component of society is technology, that technology provides a duality and therefore is a constraint or facilitator to successful advancement of society, people and organizations. Giddens and Orlikowski's background information are directly in line with what Langlois states in this section. It is with great interest of mine that Langlois seems to be of a similar mindset to what has been written in these documents.
"I now want to make the discussion more concrete by considering a particular kind of system; a society. My contention is that the theory of modular systems provides a useful way to look at the theory of social organization and to recast the classic debates in that literature." p. 14
Setting the societal foundations in a modular context makes clear to me the objectives of this research, and software development are attainable and the opportunities prolific. Not just from an individual point of view, but from one that is as broad as society itself. Langlois in this discussion also notes the contribution of
externalities. Or economic benefits to society from industry actions.
"The set of design rules that guide social interaction are what we can generally call social institutions (Langlois 1986). These rules determine (among other things) the extent to which, and the way in which a society is a modular system. The desirability of modular design is a theme with a long history in the theory of social institutions. Adam Smith long ago proposed a decentralization scheme based on what he called "the obvious and simple system of natural liberty," by which he meant a system of private property regulated by common law and subject to minimal central administrative intervention. On the economic level, this approach would lead, he believed, to economic growth spurred by innovation, learning, and an ever increasing division of labor." pp. 14 - 15
Not only Langlois but Hayek and Smith wrote on this topic.
"More recently, Hayek argued for similar principles in terms that draw even more explicit on the theory of complex systems. Indeed, the benefits of information hiding lie at the base of Hayek's opposition to central planning, which he viewed as a cumbersome non-decomposable system ill-adapted to change. Because of the dispersed and often tacit character of the knowledge individuals must use, he argued, it is not only costly but ineffective to try to construct society as an intertwined system." p. 15
"if we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place," he wrote, "it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its order. We must solve it by some form of decentralization" (Hayek 1945, p. 524)." p. 15
The work that we have done with Langlois has been very fruitful to date. We have been able to apply many of his theories to the determination of the boundaries of the firm and of the market, we have assigned roles within the price system of transaction costs and production costs respectively. All of which fully endorse the use of the Joint Operating Committee as the key organizational construct for the market. And there have been other benefits, now modularity provides a conceptual tie in to the technologies we use here. I believe the next quotation of Langlois puts into context the overall value of his research to the work being done through this blog and proposed software development project.
"What makes decentralization economically effective is the possibility of a standard interface that allows the modules to coordinate with one another without communicating large volumes of information. This interface is the price system. "The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned" (Hayek 1945, pp. 526 - 527)"" pp. 15 - 16
and
"Abstract symbols and rules can provide a visible information structure that allows individuals to operate effectively on the basis of their more concrete (and hidden) information." p. 16
Langlois now introduces the effect of property rights. I have asserted in the past the energy industry needs to refocus on new forms of competitive advantage. Specifically the inventory of oil and gas leases are the private property rights that entitle the producer to earn economic rents. In addition, the ability to employ the operational necessities of finding and producing oil and gas are the attributes that are most important to the innovative producer. How those operational necessities are employed innovatively is the producers value add that is not replicable from one producer to the other. Oil and gas leases and operational efficiencies form what I would call an energy innovation strategy, and I have not seen a more compelling, nor indeed, sensible strategy for oil and gas. Outside of these specific tasks of the producer, a less constrained view of how and where they can apply their knowledge most effectively are the benefits that are evident to me.
I have proposed that the go forward revenue stream (outside of the initial development needs) of this software project is an assessment of $X / boe for access and use of the system. If the assessment were $10 / boe / year then the costs to use this system for Encana Corporation (a 700,000 boe / day producer) would total $7 million to access and use the system for all their transactions. The definition of these systems is heavily dependent on the standards making bodies, and the demands of its users providing the direction, and use, of the system. These users being compensated for their time as either employees or independent workers of the innovative producer.
"But when the sphere of property are not well modularized - when property rights are absent, ambiguous, or ill defined - the initial assignment of property rights matter to efficiency. The symptoms of imperfect modularization came to be called transaction costs." p. 17
"Imperfect modularization came to be called transaction costs." Recall that inefficient use of transaction costs support the justification for the firm. This we have learned from Langlois. We have also learned that standards are a critical part of modular architecture, and now that poor property rights affect efficiency of the market particularly, and the firm. This last point being somewhat common sensible, however, from the viewpoint of an oil and gas producer there is no threat, ambiguity, or deficiency with the property rights they hold. This reinforces and promotes the concept of modularity that is sought through these writings in the market structure of the Joint Operating Committee.
"The economic benefits of carving out a protected sphere of authority fall into two broad categories, the concentration of rewards and costs more directly on each person responsible for them," and "comparative advantage effects of specialized applications of ... knowledge in control" (Alchian 1965 [1977, p. 140, emphasis original]). We might call these the incentive benefits and the division of knowledge benefits of property rights. Both are important, even if the first has attracted a disproportionate share of the attention of economists." p. 18
The processing of a "production cost" or market transaction has no substance or value to the oil and gas producer. It is inert, it is nothing, it is based on matter of fact principles that can, and will, never provide the holder with any sustainable competitive or strategic advantage. There is no interpretation, no analysis to determine the correct process, only application of the standards as defined in the agreements and understandings of the JOC. The producer can be provided with this market and firm based transaction processing service through the development of the software described in this blog. The firms "transaction" costs are exclusive to the specific producer, yet highly dependent on the actions of the market. Processing of "transaction costs" has no monetary, tangible, competitive or strategic value either.
New rights will emerge (or old rights will be altered), he argued, whenever exogenous conditions conspire to make the costs of modularization worthwhile. p. 19
With this last comment it is clear to me that the opportunity for the energy industry to offset the production and transaction cost processing burden to the market forces is the appropriate and timely solution to the problems that they are facing. Particularly when it comes to the difficult topic of innovation. Outsourcing is a term that poorly represents these concepts.
Modularity and Organization
The mechanisms that were used to aggregate the property rights of large corporations were the justification of the hierarchy over the past 100 years. It is the 100 years of its dominant form that has made possible the hierarchy. Now IT enables the means to more ideally place the boundaries of the firm at the optimal point, one that is consistent with Langlois theories. As I have indicated here before, the JOC is comprised of like minded producers who are motivated by their financial interest in the property. Achieving consensus is surprisingly not an issue.
"In the property rights tradition, the theory of the firm is simply an application of the theory of the coalescence of property rights. Although it is seldom clearly spelled out, the starting point for analysis is typically a world of completely modular atomistic production: each stage of production consists of an individual who owns the necessary physical capital (tools) and who coordinates his or her actions with other stages of production through arms-length transaction. Why is not all production carried out this way? Coase's (1937) famous answer is that their is a transaction cost to using the price mechanism. If transaction costs are the costs of a bad modularization, what can go wrong with the atomistic modularization?" pp. 22 - 23
What follows is a quotation that deals specifically with the joint ownership represented on the JOC. That in other industries there may have been leakage of externalities, oil and gas has had to deal with these issues since its inception, and have provided the JOC with the means, and importantly the standards, to deal with it.
"This formulation focuses on the incentive aspects of property, and it takes ownership to be equivalent to a claim on residual income (Foss and Foss 1998). Another view, originating as early as Coase (1937, pp. 391 - 392), sees ownership as involving not residual income streams but residual rights of control. Oliver Hart (1989) and his coauthors have lately championed this approach in a series of formal models. Because of uncertainty, no contract can foresee all possible contingencies. Thus there must be a residual right to make decisions in situations not covered by contract. That right is ownership, and ownership should be allocated to the party whose possession of it would maximize the joint surplus of production." pp. 23 - 24
The ownership interest within a property provides many of the attributes of a modular society. Specifically the owner of a property could be completely withdrawn from the operation of his property, and may involve himself in cashing the checks each month. Or, should the need arise, the sphere of influence over his property can be exercised. Langlois notes these rights are inherent in ownership.
"Frank Knight (1921) suggested that comparative advantage might arise if one party possesses the superior faculty of judgement (Langlois and Cosgel 1993). But, ceteris paribus, genuine uncertainty - the prospect of or need for radical change - may by itself call for a consolidation of ownership. Stephen Littlechild provides one example. p. 24
"If I am quite sure what kinds of actions my neighbour contemplates, I might be indifferent between his owning the field at the bottom of my garden and my owning it but renting it out for him to graze his horse in. But once I take into account that he may discover some new use for the field that I haven't yet though of, but would find objectionable, it will be in my interest to own the field so as to put the use of it under my own control. More generally, ownership of a resource reduces exposure to unexpected event. Property rights are a means of reducing uncertainty without needing to know precisely what the source or nature of the future concern will be. (Littlechild 1986, p. 35)" pp. 24 - 25
and
"There is also a flip side. Ownership may not only insulate one from certain kinds of unforeseen change, it may also enable one to generate radical change. I have tried to suggest on a number of occasions that concentrated ownership can overcome what I call the dynamic transaction costs of significant economic reorganization (Langlois 1992b). This is a motive for vertical integration little noticed in the literature." p. 25
This discussion strikes at the heart of the reason for this blog and the proposed software development. The energy industry employs assets that are highly specific, or
asset specificity in economic terms. Many participants are involved in a project and all have the property right and title managed by a JOC. These interests are easily divisible with the ability to buy, sell or trade the interests on an open market. Little can be done without the consent of the majority ownership, the percentage of which is defined by the JOC. Other rights and obligations are detailed through the establishment of the JOC and then subsequently through additional agreements, AFE's, Mail Ballots etc. From my non-technical point of view, having change hoisted on the property has been usually welcomed. The major properties are in a constant state of change in order to optimize the resources. This would normally pose a challenge to the management of the property, however, I have to say it doesn't. The JOC is systemic throughout the industry on a global basis. We have all heard of company x getting our of country y for political reasons. This is how the industry operates.
So why is the industry in need of the Joint Operating Committee to be defined as the organizational construct? Because it isn't recognized in its appropriate manner within the software applications that are in use in the industry. The perspective of the ERP vendors is that the corporation needs to file tax returns, SEC requirements, local government legislation's and other statutory and regulatory requirements. The corporation has evolved to the point where the only thing they are managing is these processes. The participation in the JOC's is an engineering and geological focus that are not directly recognized within the organizations systems and procedures. To be specific, the JOC is the legal, the financial, the operational decision making, and cultural frameworks of the industry. These are what drive the business, not the tax and royalty legislation. If we moved the accountability framework and sub frameworks over with the JOC's frameworks, the alignment of these frameworks would enable, greater organizational speed from the Information Technologies that are available today, and greater innovativeness on the earth sciences and engineering fields.
From a modularity point of view, the properties that are owned by the corporation are neatly encapsulated within their own environment. One facility does not leak out any information to another facility that it should not. The staff of the producer are able to move about these modules where and when they are required. A producer would know their access to the areas of which they operate would limit their exposure. Modularity to me is not just a concept that can be implemented in the systems we develop. It is a concept that is applied universally throughout the domains of the industry.
Langlois has these points;
"Jensen and Meckling (1992) agree that the concept of ownership must involve not only the possession of decision rights but also the right to alienate those decision rights. Granting an individual both control and alienability is clearly a more complete modularization than granting control alone, since the owner with alienability needs to engage in less explicit coordination with others to use the asset effectively under all circumstances. In economic terms, it is alienability that solves both the problem of knowledge decentralization and the problem of incentives: the asset may be placed under the control of the person whose knowledge best equips him or her to use it, and alienability disciplines the owners use of the asset by making its value (to which the owner has a residual claim) measurable on a market." pp. 26 - 27
"This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." For the most part, Richardson argues, firms will tend to specialize in activities requiring similar capabilities, that is, "in activities for which their capabilities offer some comparative advantage" (Richardson 1972, p. 888)." p. 27
"So why don't we observe everywhere a perfectly atomistic modularization according to comparative advantage in capabilities - with no organizations of any significance, just workers wielding tools and trading in anonymous markets? We have already seem the outlines of several answers. The older property rights literature, we saw, would insist that the reason is externalities, notably the externalities of team work arising from the nature of the technology of production itself. The mainstream economics of organization is fixated on another possibility: because of highly specific assets, parties can threaten one another with pecuniary externalities ex post in a way that has real ex ante effects on efficiency (Klein, Crawford, and Alchian 1978; Williamson 1985). Richardson offers a somewhat different, and perhaps more fertile, alternative. Firms seek to specialize in activities for which their capabilities are similar: but production requires the coordination of complementary activities. Especially in a world of change, such coordination requires the transmission of information beyond what can be sent through the interface of the price system. As a consequence, qualitative coordination is necessary, and that need brings with it not only the organizational structure called the firm but also a variety of inter-firm relationships and interconnections as well." pp. 27 - 28
As I indicated in the pre-amble of this entry the theories of Giddens and Orlikowski were consistent with the theories of Langlois in this article. In my thesis I noted that SAP is the bureaucracy and that is generally agreed too. How the industry obtains these benefits being discussed here requires the industry to
first develop the software to recognize the organizations that are necessary. I would also at this time note that the failure of industry to act in a prospective manner on developing software. Will leave their organizations susceptible to failure before they have alternatives in place. Whether this is a chaotic or orderly world will be left to the readers imagination.
"Whichever story one chooses, organization (in the broadest sense) arises as a non-modular response to the fact of, or the need for, interactions among the modules. Organization is always a de-modularization and repartitioning that severs the right of alienation from at least some of rights of decision. And, in all cases, the technology of production both causes and shapes the resulting no-modular interconnections." p. 28
Modularity, organization, and technology.
"Sanchez and Mahoney (1996) contend that products design organizations. In a sense, however, this is a variant on what the mainstream economics of organization has long believed: production processes design organizations. If the production process requires team production or calls for highly specific assets, a non-modular structure ("hierarchy") is in order; otherwise, a modular structure ("the market") is more appropriate." p. 28
The energy industry is a unique business. An industry that operates with the full cooperation of the other producers. Others producers are necessary to aggregate a land position, process production, or to meet regulatory requirements. As a result it has established a variety of non-profit organizations that define the operations and procedures. The JOC is the means for the industry to meet these requirements. If as Langlois and others say, "production processes design organizations" the JOC should be more involved in the day to day interactions of the producers. If we designate the scope of authority of the JOC as being the "market" and have the software developed to support this classification, it is clear in the writings of Giddens, Orlikowski and Langlois that the performance of the industry would change. For as the JOC is the legal, financial, operational decision making and cultural means of the industry.
Although I have not included much discussion regarding the technology and its role in defining modularity in the oil and gas industry. It is surprisingly close to the writings here of Langlois. Today it can generally be considered that the collaborative technologies are superior to the current methods of meetings, memo's, and snail mail. The business is the efficient discovery and production of hydrocarbons. It truly has nothing to do with the SEC, the Tax authorities or for that matter the shareholders. These are secondary to the primary role of the business. The focus should be on the primary responsibilities and let the secondary requirements flow from the actions of the former. The technology, as has been detailed here by Langlois, enables this.
I hopefully have also laid to rest the concept that the manner of this software development project does not provide any producer with a strategic advantage. The advantage is earned through the competitive and difficult process of acquiring land and establishing commercial hydrocarbons. Generic transaction processing is a requirement of the business, not a strategic or competitive advantage. It's ultimate role should be the deployment of the most efficient methods.
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