Extrinsic Value

People, Ideas & Objects value proposition captures the difference in commodity prices under the current administration and those that would be realized with our price maker strategy. The difference between the $50 realized today and the $151 we have detailed that are the producers current costs. A variance that I think should be of material concern to the producers. There is the concept of intrinsic value and extrinsic value of a company, or in this case the producers. What bureaucrats should be concerned about is the intrinsic value that is attainable through their distinct competitive advantages. Anything else is a distraction. Pursuit of the extrinsic value which would include our value proposition is not within the competitive advantages of any of the producers and the bureaucrats would therefore have a valid argument not to pursue it. That is until it’s realized that ERP systems are a business necessity of the functioning producer firm. And that producers in North America face an existential crisis as a result of the chronic low commodity price environment that they’ve found themselves in for an extended period of time.

It’s easy to see how the $100 / boe in extrinsic value that is our value proposition equals $25.7 to $45.7 trillion over the next 25 years. Bureaucrats are currently compensated adequately and to search for this value would require substantial effort for them to achieve. Something I don’t think their oriented too. Besides “market rebalancing” will soon arrive and the party will once again begin. This bureaucratic complacency and lack of caring in the face of such destruction is amazing. I would argue that my point of view, as expressed in yesterday’s post, is not news to any of the bureaucrats. My claim that there may be no plans in place could also be incorrect. There could be plans, it's just that none of the bureaucrats plans involve the producer firms. Bailing out of a situation that is deemed to be unfixable is the history that has been recorded by bureaucrats throughout their existence. Maybe they’ve changed their ways.

I’ve always worked in oil and gas and understand the difficulties and complexities of the producer firm. The risk is extremely high, however producers never have to face the market risk that most other types of companies have to face. Will the market want or need my product? Will there be enough demand to make the business viable? These are never faced by the producer. Any oil or gas that is produced finds a readily available market anytime and anywhere. So why in the world would we ever sell any oil and gas, products that are as difficult to discover and produce as anything, unprofitably? A product that we have a limited supply of in terms of the lifetime of the oil and gas era. However have an abundant current inventory that floods the market and collapses the prices to the point where they barely cover the variable costs. Who would do such a thing, and why would they call that a business? I think that maybe selling oil and gas below cost is the foolish and lazy man's way to a false prosperity. I think the oil and gas investors may now share my point of view. This the bureaucrats would say, is one of my controversial issues. Not that I called them lazy and foolish but that oil and gas should never be sold unprofitably.

Producers should be active participants in the oil and gas markets. They’re not passive idiots are they? Why do they just stand around, take whatever is offered, and then mouth the words “market rebalancing.” They would have to be foolish and lazy to conduct themselves in such a fashion. They’ve done this now for decades and don’t seem to realize the damage they’ve done and are doing. Within the industry itself it’s all sunshine and rainbows. There is not a hint that anything is happening that is problematic. As far as the North American producer is concerned it’s only a matter of time before OPEC realizes they have to heal to them and to cease all production. Is it viable to assume that OPEC will continue to reduce production in the face of continued increases in North American production. Is this viable or reasonable, who other than the producers would believe that? OPEC’s costs of production are single digit percentages of our costs. They’re still highly profitable at today’s prices. The North American producer likes to think the Saudi ministries need the petro dollars to keep their society going. And that might be true. Then for comparison sake the North American producers should adopt the U.S. and Canada’s federal debt and deficit.

There’s a theory that the Saudi’s are only playing nice with the production sharing agreement until such time as they’ve completed the IPO of Saudi Aramco. Then they’ll be free to produce at whatever production profile they choose. If the Saudi’s are truly profitable at $50, but also at $20 whatever happens to the price will be of little consequence to them. The North American producers, who are not currently profitable at $151 and are facing the end of their days, will then be expected to put up the good fight? The days in which the North American producers have their extrinsic value available to them and the intrinsic value under their control is very limited. I would say until September 25, 2017, and then depending on their actions maybe beyond that.

The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Shell's van der Veer get's it.

First off I need to declare that I am a Shell brat. My father was employed with Shell Canada for over 33 years and became one of their happy annuitants. I have been raised, fed and clothed by his work at Shell, by far the best oil and gas company in the world. This is for one and only one reason, it hires the best people. I am only disappointed that I was unable to work for Shell during my career, however, I look back fondly at the times in high shool that I worked in the mail room after grade 10 and their geological lab after grade 11.

Van Der Veer has captured the proper perspective and attitude for the oil and gas industry.

Energy demand will double between now and 2050,” van der Veer said today in a presentation at a Houston energy conference. “People like to have electricity and they like to drive in cars.

This is not a political issue, it is not a business issue, its a responsibility of the oil and gas industry that needs to get done. Doubling the demand for energy is probably correct, irrespective, it is our duty to meet the markets demands. What we have been consumed with these past 10 years is maintaining the status quo stock options, bonuses, salaries and perks for management. At least that is the case in CNRL, Petro-Canada, Encana and Nexen, our four little pigs. 

Does anyone suggest that we maintain the hierarchy until 2050? Of course not. Why is it acceptable, in this time of change, that we keep the failed and ineffective bureaucracy? Other then the bureaucracy hanging on to its failed ways, no one would reasonably suggest that the bureaucrats continue on to 2050.  Things are certainly different at Shell.

The Hague-based Shell, the world’s third-largest oil company by market value, is among a handful of petroleum producers that isn’t cutting spending this year on exploration and refineries in response to the $105-a-barrel decline in oil prices.

Keeping the past alive is for those that think our best is behind us. Join me here, and lets continue the journey to at least 2050.

Technorati Tags: People's Change Organization Strategy Trends

The executioner is primed.

This headline showed up in the Calgary Herald the toay. It's taken me the better part of a day to refocus;

Brewing shareholder revolt puts Petro-Canada in hot seat.

It's been quiet from the point of view of our Piggies. Although Petro Canada reported losses for the last quarter of 2008. I have been waiting for more information to come in before I post anything. But this news article trumps anything that I could have written.

It seems that I am not the only one that is holding their nose as a result of the smell around here. The shareholders are not pleased either. Listen to this little tidbit.

The integrated oil company’s poor performance has riled its shareholders, including the Ontario Teachers’ Pension Plan, which is said to be preparing a 13D regulatory filing with the U.S. Securities & Exchange Commission. That filing may signal a push for a change of control.

I think I'm going to put my pot on simmer and watch this one develop on its own. I also have a very interesting idea of what I think is happening at CNRL. Something seems to be developing there with the recent dumping of the firm by Fidelity, and now they are not going to report their quarters earnings until March 5, 2009? Conoco Phillips, ($68 billion market cap.) which I think is a bit bigger then CNRL ($18 billion market cap.), accountants have managed to get their financial's out over a week ago. Accountants at CNRL must need more sleep.

Something is seriously wrong at CNRL, and based on my November 10, 2008 suggesting the "questionable" nature of their third quarter report, I sense we're in for a surprise. I'll even give a little hint, it's on the Horizon, so stay tuned.

Technorati Tags: People's Pig Management Failure

Nouriel says the "D" word.

This week we have been able to focus on the community that needs to form here. A community that needs to build the People, Ideas & Objects ERP styled software systems that are desperately needed for the oil and gas industry. Today we have a fairly strong dose of negative economic news, and I submit these latest articles to provide the support for the changes that are needed. If we don't act, we will be in a much more dire situation then we currently find ourselves.

First is Professor Nouriel Roubini states the "D" word. He also states that the five top U.S. Banks are insolvent. Nouriel may be the most famous economist due to his precise calling of this economic decline. Noriel has provided very sound quantitative and qualitative analysis of what is happening economically. Prescribing some of the remedies that are necessary to offset this decline. When he starts using the "D" word, I think it is very serious point. His most recent interview was on Wednesday with Bloomberg News "On the Economy" with Tom Keene at the Davos, Switzerland World Economic Forum. I highly recommend listening.

Next is the earnings of the oil and gas producers. Conoco Phillips fired the first shock in the season by reporting a loss of $31.8 billion for the fiscal 2008 year. Wow, must be a problem there.

Lastly the news comes from Forbes, Occidental Petroleum's Chairman finds that the current pricing structure is inadequate to cover the cost structure.

"The current oil and gas industry cost structure is higher than what the current product prices can support," said Dr. Ray Irani, the company's chairman, who said the company would lower its 2009 capital spending budget to $3.5 billion to protect its returns.

Hm must be a problem there. Just a note, I don't think I will be reporting on any more oil and gas company earnings outside of the Pigs. (CNRL, Nexen, Petro Canada and Encana.) Conoco is a well run firm, however, that is in the context of last centuries performance. The Pigs are deserving to get stuffed and I'll continue on as they release their losses.

The need for this community is evident, and is on display in almost every business article written today. The economic decline is going to get much worse, the oil and gas companies are being questioned with their own survival, and the need for this community to form and get on with the job of building the next generation systems AND organizations is now, please join me here in doing these critical tasks.

Technorati Tags: People's Community Economics Failure Energy

"Almost" two down and two to go.

Management of the Piggies, our nickname for Encana, Canadian Natural Resources, Nexen and Petro Canada have had a really bad quarter. Since July of 2008 when they had $3.3 billion of "in the money" stock options, they've lost a bit.

First it was their options which quickly evaporated when the market meltdown started its Tsunami like roar. Now it seems to have turned more personal. First was Charlie Fisher to announce he is leaving Nexen as its CEO. Now the focus seems to be on Petro Canada.

Our local paper The Calgary Herald is reporting that the "Fort Hills" heavy oil project operator, Petro Canada is now "deferring development". But that's not the key point of the article. (If you listen carefully you can hear the ghosts of Arthur Anderson's staff using their shredders.) It seems some people who own Petro Canada are not particularly happy with the management, stating:

Part of the stock's downdraft Monday was due to oil prices falling to their lowest levels since January 2007, but another reason offered for the absence of market support was a lack of confidence in the company's management. The most-often asked question among the investment community of late-- behind closed doors, of course --has been around when the company's chief executive, Ron Brenneman, might be stepping aside.

So lets mark this one as a "half way" through the door. Careful guys don't let the door hit you on the way out. Leaving us with only Encana and Canadian Natural Resources. What's that saying about the bigger they are the harder they something or other. Lets predict that CNRL is the next to loose the top echelon of the firm. Remember, they thought strength in numbers would provide good cover when things got hot. But with 45 different individuals with Chief or President in their titles, it just might be best to get a forklift.

Technorati Tags: People's Pig Management Failure

Easy Come, Easy Go.

Or is it.

I documented the $3.3 billion in stock options for the four little piggies, (Encana, CNRL, Nexen and Petro-Canada.) in a posting dated July 16, 2008. As of Friday's October 10, 2008 closing prices the value of those options now total $57.2 million. (Values based on 2007 weighted average options and prices.) The problem is that the investors in these companies have experienced a far more substantial haircut in their share holdings. (Piggies are down 53.4% to 65.5%).

From my point of view these alleged management types are better understanding the market and the scope of their greed. This provides justice to those who were so slovenly in the past. I wonder what Monday's trading will have in store for these wonder pigs. Recall they were in the forefront of rewarding and congratulating themselves for the higher stock valuations from commodity price increases. Therefore we should ensure that they are also compensated for the damage to these companies from the decline in commodity prices. These pigs brought that upon themselves, and in the future these management should understand that you reap what you sow.

But wait, not only are they incompetent, they have also lost their motivation. I wonder if they'll quit before anyone has the chance to be fire them? I've always believed a firm that loses greater then 53.4% of their market value is considered a non entity. That large of a loss in a firm is a reflection of the future of the firms opportunities. All the Kings Horses and All the Kings Men. (Ricky Gervais provides some insight and comedic relief.) 

The investor class is now forced to act in recovering their assets and value. Kick these bastards to the curb and lets start building the oil and gas industry for the 21st century. As I said these managements are now unqualified, unmotivated and unproven to hold the offices they occupy. They have damaged the firms to the point where they will be walking corpses for the next several decades, and that is being optimistic. Fire the bunch, you certainly can't trust them. I don't trust them, as any group of companies that would attempt to steal ones Intellectual Property, as these firms attempted to take the idea of using the Joint Operating Committee, are crooks.

Pig courtesy of http://designedtoat.com/pig.htm

Technorati Tags: People's Pig Call-to-Action Management Failure

Professor Peter Klein on Entrepreneurship

We have an interesting paper that deals with the topic of entrepreneurial leadership. I am of the belief that entrepreneurship will be a much larger component in each and every individuals makeup. People's careers used to span their working life at a single firm. Careers now span the working life of an individual within one industry. In the very near future, we may see careers span multiple companies as well as multiple industries.

To achieve this level of dynamic working environment, an individual will be relying far more heavily on their entrepreneurial skills. What does that mean, and what exactly are entrepreneurial skills and entrepreneurial leadership. This paper offers the opportunity to better define these difficult to quantify and qualify terms. These entrepreneurial definitions are also key attributes of making this software development project successful.

This web-log has never reviewed any of Professor Peter Klein's work. I have however subscribed to the Organizations and Markets (their Feed ) web-log of Peter Klein and Nicholas Foss' for over two years and as such have either highlighted individual posts through the Google reader interface, or commented on them briefly through Professor Langlois' writings.

It was through Organizations and Markets that Professor Langlois was introduced as a guest blogger. Professor Langlois had just received the Schumpeter prize and was writing as a guest. He now frequently writes as a regular contributor to Organizations and Markets and his research was a foundation on which the Draft Specification was built.

The topic of Entrepreneurship has become more and more a part of the mainstay of the business environment. This has particularly been the case since the 2000 .com crash. The entrepreneur has since become enabled through the Information and Communication Technologies. Technologies that are real in comparison to what was hoisted as innovative in the pre-2000 era. So lets find out what we can learn in order to assist the understanding of the users and developers about these somewhat vague terms.

Professor Klein sets the stage of how critical the entrepreneur has become.

"Entrepreneurship is one of the fastest-growing fields within economics, management, finance and even law. Surprisingly, however, while the entrepreneur is fundamentally an economic agent -- the "driving force of the market," in Mises's (1949, p. 249) phrase -- modern theories of economic organization and strategy maintain an ambivalent relationship with entrepreneurship." p. 1

I would be at a loss to further define the role of the entrepreneur importance in this software development project. I have selected the name of this project based on Professor Paul Romer's new growth theory that involves People, Ideas & Things. Whereas "Things" is replaced with the software "Objects" that we use to capture the oil and gas business understanding in the software. Professor Klein also discusses some of the difficulty in defining what an entrepreneur is.

"It is widely recognized that entrepreneurship is somehow important, but there is little consensus about how the entrepreneurial role should be modeled and incorporated in economics and strategy. Indeed, the most important works in the economic literature on entrepreneurship -- Schumpeter's account of innovation, Knight's theory of project, and Kirzner's analysis of entrepreneurial discovery -- are views as interesting, but idiosyncratic insights that do not easily generalize to other contexts and problems. p. 1

Why this is important. I think every business user has been faced with the near impossible task of making changes in the reports and analysis of their systems and data. Many are forced to use the interfaces that are provided by an SAP or Oracle application. Interfaces that the users could improve upon with some minor data, processing or alternative changes. However, knowing the difficulty in making these changes has silenced any and all initiative in the corporate world.

Asking for change will require too much effort and political skill to make the changes worthwhile. It is through the users ability to discuss their information processing requirements in this project, and subsequently see and incrementally improve upon the software applications that they use. This is what People, Ideas & Objects is providing, a place where users and developers can work together to make the oil and gas worker more enabled, innovative and entrepreneurial.

Making the working environment more user friendly may have been a goal prior to the web. Now users demand higher quality applications that they can make changes to. This is an important concept and Professor Klein states the reason why.

More recently, the Austrian economist Israel Kirzner has popularized the notion of entrepreneurship as discovery, or alertness to profit opportunities. p. 2

If change is the constant, and we are to enable the entrepreneurial spirit of the individuals that work in the industry; to discover, be alert and to most importantly implement profit opportunities. These are the primary motivating factors of these individuals. Why would they need to file a change request, fill out the forms, estimate the costs, seek budget approval, and have the signing by four authorized individuals to benefit the company? These changes need to be able to be implemented in a more efficient manner through the natural interaction of the users and the developers.

Innovation has at its core certain trial and error elements. Approving the bureaucratic change request that ultimately leads to an error will ensure that user is never authorized again. However, what we have learned about the innovative oil and gas producer is that failure is the critical part of learning. An error should not mean that the individual has no credibility for future changes. It should mean exactly the opposite. Who therefore should be the one to make the decision on what changes the users want? Particularly if the individuals compensation is at stake.

Opportunities are essentially subjective phenomena (Foss, Klein, Kor, and Mahoney, 2008). As such, opportunities are neither “discovered” nor “created” (Alvarez and Barney, 2007), but imagined. They exist, in other words, only in the minds of decision-makers. p. 2

Recall in the "Secrets of Successful Execution" blog post, "Execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self interest." And...

By contrast, the classic contributions to the economic theory of entrepreneurship from Schumpeter, Knight, Mises, Kirzner, and others model entrepreneurship as a function, activity, or process, not an employment category or market structure. The entrepreneurial function has been characterized in various ways: judgment (Cantillon, 1755; Knight, 1921; Casson, 1982; Langlois and Cosgel, 1993; Foss and Klein, 2005), innovation (Schumpeter, 1911), adaptation (Schultz, 1975, 1982), alertness (Kirzner, 1973, 1979, 1992), and coordination (Witt 1998a, 1998b, 2003). p. 4

I would think that attempting to source these qualities from the management of a firm would be futile.

By focusing too narrowly on self-employment and start-up companies, the contemporary literature may be understating the role of entrepreneurship in the economy and in business organization. p. 4

It bears asking, is the entrepreneur the prototypical employee of the future? Klein now focuses on the profit motive of the entrepreneur in their optimal situation. Suggesting that the competitive and profit motive are the reasons that workers in the oil and gas industry will be motivated to make these changes. If the user has a vested interest in their own profits as a result of their actions, does that also imply that the producers interests are well taken care of by the user?

Judgment is distinct from boldness, innovation, alertness, and leadership. Judgment must be exercised in mundane circumstances, for ongoing operations as well as new ventures. Alertness is the ability to react to existing opportunities while judgment refers to beliefs about new opportunities. Those who specialize in judgmental decision making may be dynamic, charismatic leaders, but they need not possess these traits. In short, in this view, decision making under un-certainty is entrepreneurial, whether it involves imagination, creativity, leadership, and related factors or not. pp. 5 - 6

and

Mises’s point is that a socialist economy may assign individuals to be workers, managers, technicians, inventors, and the like, but it cannot, by definition, have entrepreneurs, because there are no money profits and losses. Entrepreneurship, and not labor or management or technological expertise, is the crucial element of the market economy. As Mises puts it: directors of socialist enterprises may be allowed to “play market,” to make capital investment decisions as if they were allocating scarce capital across activities in an economizing way, but entrepreneurs cannot be asked to “play speculation and investment” (Mises,1949, p. 705). Without entrepreneurship, a complex, dynamic economy cannot allocate resources to their highest valued use. p. 7

Entrepreneurship as opportunity identification.

Is it in the best interests of the oil and gas firm and industry to permit the individual to be more entrepreneurial? And lets be candid, they will as a result of this freedom be better able to earn much higher wages and profits then they would qualify for in today's organization. Although the costs of employment may be higher for firms within the industry, the ability of the industry to move further and faster is the net result. And with prices for energy commanding ever larger revenues, this sharing of the value is of the best interest to all concerned.

The most important exception is the literature in management and organization theory on opportunity discovery or opportunity identification, or what Shane (2003) calls the “individual–opportunity nexus.” p. 7

and

Shane and Venkataraman (2000, p. 220) define entrepreneurial opportunities as “those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production.” p. 8

Klein seeks to parse what an entrepreneur is in terms of a classification based on type. Defining a "Discovery" and "Creation" approach. A mix of these two classifications of entrepreneurs would work hand in hand in developing new sources of value for the oil and gas producer.

Entrepreneurship research may be able to realize higher marginal returns by focusing on entrepreneurial action, rather than its presumed antecedents. Alvarez and Barney (2007) argue that entrepreneurial objectives, characteristics, and decision-making differ systematically depending on whether opportunities are modeled as discovered or created. In the “discovery approach,” for example, entrepreneurial actions are responses to exogenous shocks, while in the “creation approach,” such actions are endogenous. Discovery entrepreneurs focus on predicting systematic risks, formulating complete and stable strategies, and procuring capital from external sources. Creation entrepreneurs, by contrast, appreciate iterative, inductive, incremental decision making, are comfortable with emergent and flexible strategies, and tend to rely on internal finance. pp. 11 - 12

As with sharing in the profits of their entrepreneurial actions, losses that are incurred in the discovery and innovation process would be shared as well. This also provides the entrepreneur with the knowledge that risk is inherent in their actions and they should be mindful of the consequences.

Likewise, realized entrepreneurial losses do not fit naturally within a creation framework. Alvarez and Barney (2007) emphasize that “creation entrepreneurs” do take into account potential losses, the “acceptable losses” described by Sarasvathy (2001). “[A]n entrepreneur engages in entrepreneurial actions when the total losses that can be created by such activities are not too large” (Alvarez and Barney, 2007, p. 19). However, when those losses are realized, it seems more straightforward to think in terms of mistaken beliefs about the future—expected prices and sales revenues that did not, in fact, materialize—then the “disappearance” of an opportunity that was previously created. Entrepreneurs do not, in other words, “create” the future, they “imagine” it, and their imagination can be wrong as often as it is right. p. 13

Opportunities as a black box.

Here is where Professor Klein gets into the topic of why a firm needs to compensate the entrepreneur for these actions. Why can't the people employed by the firm determine these opportunities as a nine to five salary based job? Klein identifies the key characteristic that is necessary to make the entrepreneur, and not the salaried employee, motivated. These characteristics are also necessary characteristics in the future oil and gas industry. An industry that has unlimited potential when the resources of the industry are released to earn profits in their chosen field. And I am not talking about just the engineers and earth scientists, all those are critical, but also the people that are involved in the business of the producer and are able to optimize the profit seeking potential through other professions such as Accounting and Administration.

Although some researchers argue that the subjective or socially constructed nature of opportunity makes it impossible to separate opportunity from the individual, others contend that opportunity is as an objective construct visible to or created by the knowledgeable or attuned entrepreneur. Either way, a set of weakly held assumptions about the nature and sources of opportunity appear to dominate much of the discussion in the literature. pp. 13 - 14

and

Do we need a precise definition of opportunities to move forward? Can one do entrepreneurship research without specifying what, exactly, entrepreneurial opportunities “are”? Can we treat opportunities as a “black box,” much as other concepts in management such as culture, leadership, routines, capabilities, and the like are treated (Abell, Felin, and Foss, 2007)? p. 14

and

The creation approach treats opportunities as the result of entrepreneurial action. Opportunities do not exist objectively, ex ante, but are created, ex nihilo, as entrepreneurs act based on their subjective beliefs. “Creation opportunities are social constructions that do not exist independent of entrepreneur’s perceptions” (Alvarez and Barney, 2007, p. 15). In this sense, the creation approach sounds like the imagination approach described here. Still, like the discovery approach, the creation approach makes the opportunity the unit of analysis. How entrepreneurs create opportunities, and how they subsequently seek to exploit those opportunities, is the focus of the research program. pp. 14 - 15

and

An alternative way to frame a subjectivist approach to entrepreneurship, emphasizing uncertainty and the passage of time, is to drop the concept of “opportunity” altogether. If opportunities are inherently subjective, and we treat them as a black box, then the unit of analysis should not be opportunities, but rather some action—in Knightian terms, the assembly of resources in the present in anticipation of (uncertain) receipts in the future. p. 15

For the purposes of this post I think we risk losing the reader and the substantial value that Professor Klien has developed here. With a clear definition of the entrepreneur in the innovative oil and gas producer we can see how the dynamic nature of the industry can develop. What this display's in rather stark terms is the role of management. The management is substantially diminished in the innovative oil and gas producer firm. Although not completely eliminated, the roles of management, and particularly those skills that emulate much of the Soviet era "central planner" are eliminated.

Through the little piggies analysis of Encana, Petro-Canada, Nexen and CNRL. We see the capabilities of the current management is unable to understand;

• The business that they are in, selling production forward at substantially discounted prices.
  
• Unable to attain the speed in which they approach the business, announcing declining production levels.
• The level of innovativeness that is lacking. More of the same (particularly stock option compensation) offered as the solution.
  

Eliminating the level of management "planning" and their associated high costs are what the investor should seek to achieve through the development of this software.

Foss, Foss, Klein, and Klein (2007) show how this approach provides new insights into the emergence, boundaries, and internal organization of the firm. Firms exist not only to economize on transaction costs, but also as a means for the exercise of entrepreneurial judgment, and as a low-cost mechanism for entrepreneurs to experiment with various combination's of heterogeneous capital goods. Changes in firm boundaries can likewise be understood as the result of processes of entrepreneurial experimentation. And internal organization can be interpreted as the means by which the entrepreneur delegates particular decision rights to subordinates who exercise a form of “derived” judgment on his behalf (Foss, Foss, and Klein, 2007). pp. 19 - 20

It is critical to recall the key competitive advantage of the innovative oil and gas producer is their land base, physical infrastructure and capabilities in finding, developing and producing oil and gas. The entrepreneurial services necessary for the producer to achieve the maximum profit in this business are very broad and I suggest must be based on the markets (or JOC's) offerings. Klien also notes.

Here, as in Coase (1937), the employment relationship is central to the theory of the firm. The entrepreneur’s primary task is to coordinate the human resources that make up the firm. Foss, Foss, Klein, and Klein (2007), by contrast, focus on alienable assets, as in Knight (1921). They define the firm as the entrepreneur plus the alienable resources the entrepreneur owns and thus controls. Each approach has strengths and weaknesses. The cognitive approach explains the dynamics among team members but not necessarily their contractual relationships. Must the charismatic leader necessarily own physical capital, or can he be an employee or independent contractor? Formulating a business plan, communicating a corporate culture, and the like are clearly important dimensions of business leadership. But are they attributes of the successful manager or the successful entrepreneur? pp. 20 - 21

Of course there is always an alternative to what is discussed in this blog. That is to do nothing. If however, you feel that the time for these changes is now, join me here. If you know of like minded people, send them the URL to this blog and most importantly, click on the PayPal button to donate.

Technorati Tags: People's Entreprenurial Leadership

Deja vu, all over again.

A number of years ago I did some analysis on Petro Canada that remains some of the most popular content on this blog. I thought since they did not make any material changes as a result of the analysis. I would just link the posts in this one entry.

Petro Canada Q2 Earnings
Petro Canada Piles it on Again
Petro Canada's accountability framework
Oil and Gas Reserves of Petro Canada
Top 10 Management Excuses from Petro Canada
Petro Canada Garage Sale continues
Petro Canada's First Quartile
Petro Canada Definitions
Maturation of Petro Canada
Petro Canada Options
Petro Canada news management
Petro Canada is more disturbingPetro Canada Series
Petro Canada Executive
Petro Canada
Petro Canada Definition of Value
Anti-Petro Canada
Petro Canada Some Clarifications
Petro Canada's Conflicting Statements
Petro Canada's Reserve Report
Petro Canada Earnings
Petro Canada Believes 


Enjoy!

Technorati Tags: People's Management Failure

And this little piggy...

Up next in the shocking level of stock option compensation, is Nexen. Their 2007 based compensation was $175 million "in the money" and $465 million "in the money" stock options issued and outstanding. For a total "in the money" compensation of $640 million. The total of the four oil and gas companies is now $3.36 billion. You tell me if you think its excessive.

Company	Stock-Options	Market Cap
Canadian Natural Resources	$1.53 billion	$50.6 billion
Petro-Canada	$492 million	$24.5 billion
Encana	$698.2 million	$62.8 billion
Nexen	$640.0 million	$19.3 billion
Total Producers	$3.36 billion	$157.2 billion
Apple	$873 million	$151.9 billion

I have stated here that these companies had the opportunity to address these problems almost five years ago. What has happened since then is an inability of these firms to make their targets in terms of production volumes. This has occurred on an almost systemic basis with each company reporting that there are material cost overruns and scheduling problems. More or less these companies can't keep up to the demand for energy. Can't keep up because they are too bureaucratic.

But there's more. Over the course of time we have seen the problem escalate in the world. That wasn't of any concern of these companies. Indeed we have seen the slackening of their pace and a deadening of their sense of urgency. Confident in their abilities to control their environment from any serious criticism of their performance. They became bold in their actions and believed they were entitled to these stock options. Stock options that became valuable from increases in earnings from higher prices. High prices that masked the declines in reserves and production. After all it was working. They are now that much closer to their retirement, a retirement that will be far more comfortable. This was their special reward for gracing the oil and gas industry with their presence. Don't do anything and be richly rewarded.

The consequence of their greed is reflected in this article from ASPO USA:

The CIA reports that there are 266 “nations, dependent areas, and other entities” on the world today. During the last few weeks at least 90 of these are reported to be having continuing serious or very serious energy shortages. The number of countries with energy problems may be much higher as the CIA also reports that 94 of the world’s nations are islands many of which are so small they are rarely heard from but are almost certain to be suffering from $140 oil.

When I proposed this idea in September 2003 and subsequently published the research results in May 2004. These two dates were not the only times I marketed to these companies. I have contacted those within the industry, and particularly the four pigs I've already mentioned, (Petro Canada, Encana, Canadian Natural Resources, and Nexen) on an annual and semi-annual basis. The last time being December 11, 2007. I always received the same response of "not at this time". Well of course not, they hadn't retired, and who wants to work hard?

Well the time has now past by any reasonable measure. And the management have proven that they are not capable of acting in any constructive way, other then for themselves. Therefore I appeal to the investor class to take action and fund these software developments. Create the necessary alternative organization for you, the investors, to able to manage your assets.

Do we have to wait until their are riots in Europe, Canada and the U.S. before someone dispatches these people to the pig sty? Is $4 gas enough? I don't think so, we have a lot of pain heading our way due to these selfish people. What more do we need to realize that the same old muddling along just isn't going to work. Join me here.

Technorati Tags: People's Management Failure

Matthew Simmons calls to stop the witch hunt.

I have to credit Mr. Simmons with the fact that he is the individual that turned my thinking towards solving this problem. He is the leader of the Peak Oil theorists and his recent CNBC video reflects his sense of urgency. He states lets stop the witch hunt and get on with it.

I would tend to agree with him however, the bureaucracies that are endowing themselves in the trough today are the same people and companies that have ostracized me from the oil and gas industry. I feel fair is fair. I was certainly on topic when I wrote the following in my May 2004 report to them.

It is suggested in this research that the speed that a bureaucracy can adapt and change is inadequate for the operational demands of a future oil and gas operation. Innovation within the oil and gas industry will be required in order to keep up with the natural and increasing rate of decline in production. Where the sciences of geology and applied sciences of engineering, which cover a broad range, will need to progress substantially in the next 10 years in order to achieve the demand requirements of the North American energy consumers. p. 71

It is these same bureaucracies that now point to the accelerated depletion as the reason for their loss of production. Again this is not something that they are becoming familiar with today. If I wrote about it May 2004 I can assure you that it was common knowledge at the CEO, CFO and COO level throughout the industry.

Secondly, who does the energy consumer turn too. I say we follow the money. These companies have 100% of the revenues from oil and gas sales. It is they that could have, AND SHOULD HAVE, done something. In their attempt to steal this idea from me, after I made my September 2003 proposal to them, is evidence that this idea had legs in their minds. That is the point in time in which they should have realized their ILLEGAL ways and done something positive. Nonetheless, and irrespective of the past, if they have known about this for almost 5 years, why have they done nothing?

The fact of the matter is the companies know the investor class has no alternative but to turn to them. In this day and age doing any change in the organization requires the software to be developed first. I know they know this because I was the one that told them. In my May 2004 preliminary research report it was stated in the review of Dr. Anthony Giddens and Dr. Wanda Orlikowski.

Dr. Orlikowski’s structurational model of technology proposes two key aspects: the duality of technology and the interpretative flexibility of technology.

"The duality of technology means that technology is the product of human action and assumes structural properties: it is physically constructed in a given context and socially constructed through different meanings."

"The interpretative flexibility of technology suggests that technology is continuously constructed in social and physical ways, that there is a time space discontinuity (development is separated from use in both context and time) in traditional models, and that individual and social factors influence users working with and shaping technology."

I say let the witch hunt begin! These companies have done nothing since 2004 to earn the benefit of the doubt. They knew the problem, they tried to take this idea and manage it themselves, and they know the investor class can only turn to the management. And they have known all these things for the past 5 years.

So lets toss another log on the fire. Encana Corporation paid "in the money" stock options worth $490.7 million and has options remaining that are "in the money" by $207.5 million. Now remember, I only distributed the research proposal and preliminary report to firms with head offices in Calgary.

These three (Petro-Canada, Canadian Natural Resources and Encana) have endowed their managements with a total of $2.7 billion in stock based compensation.

Join me here, and lets cast these pigs from the trough to the mud pits.

Technorati Tags: People's Management Peak-Oil Failure

The IEA gets it.

The IEA has as their guiding principle "Energy Security, Growth and Sustainability through cooperation and outreach." This is the appropriate position for every energy consumer or producer. As consumers we should not limit ourselves in any manner. Acceptance of a lower standard of living, or a future that is constrained by energy, is a defeatist attitude and capitulation of the benefits of globalization.

As a producer the efforts to fulfill that promise to the consumer now comes with extremely attractive financial incentives. Isn't it too bad that the industry, which is at record levels of capital expenditures, is moving backwards in their production volumes. As is painfully obvious to most, the organizational methods of the industry do not enable them to participate in this market for much longer. This is not a job for the bureaucracy.

You can however mark me as surprised when I read the following in the Australian Business;

The IEA's outlook resonated with the views of oil company executives at an industry conference in Madrid, who said the red-hot oil market reflected deep-seated pessimism about the industry's ability to open the spigot to satisfy rising demand.

The industry actually kind of admitted they understand the problem. I have certainly made it clear that the producers management lack the motivation to do anything about it. And it will be the investor class that needs to fund these software developments in order to provide them with an alternative form of organization for their oil and gas assets. This quotation from a number of faceless executives at a conference is the first tangible recognition that a problem exists. We however, do not have the time to wait for these companies to do something about it. Our first act should be to axe the management of these failing firms.

Perhaps one of the most disappointing figures to emerge from the IEA report was its assessment of oil production by nations outside the OPEC cartel. Non-OPEC supply was "paltry to say the least", said Mr Eagles, the IEA's head of market analysis, and had been revised down since last year's market report. He said crude supply from non-OPEC countries would remain at or below 39 million barrels per day over the next five years, though it would rise after 2013.

The Wall Street Journal noted the following in their blog;

Project delays averaging 12 months, coupled with global average decline of 5.2% - up from 4% last year – are the factors behind these revisions. Over 3.5 mb/d of new production will be needed each year just to hold global production steady. “Our findings highlight again the need for sustained, and indeed, increased investment both upstream and downstream — to assure that the market is adequately supplied,” stated [IEA Executive Director Nabuo] Tanaka.

And Yale comes in with the following;

Global leaders fret about climate change and economic growth, throwing out blame in many directions. But finding fault or inequities does little to solve the problem of rising demand for energy and a declining supply, argues Chandran Nair, founder and CEO of the Global Institute for Tomorrow. The bottom line is that the world economy has become too dependent on fossil fuels.

It is tiresome to be reading these quotes about the problem. If you read the 2007 annual reports the companies could not be happier with the situation. They had the opportunity to do something about this almost five years ago. When I proposed this software development solution in September 2003, an idea that they clearly understood, and an idea they stole from me and handed over to Daniel Yergin's company, Cambridge Energy Research Associates to research. Isn't it also ironic that Daniel Yergin's "unprecedented 16 million barrels" of new production never showed up? Good thing CERA's 220 PhD's were'nt as quick as I was in publishing.

If the producers management thought it was such a good idea to spend money on the idea of using the Joint Operating Committee as the key organizational construct in September 2003 with CERA, doesn't this prove they are guilty of allowing this situation to occur? I repeat the management are not realizing this situation in a conference today. Matthew Simmons has been warning about it for almost a decade. These companies are not acting in anyones interest but the self-absorbed managements. Take any companies stock options and calculate the amount they "are in the money" and you'll see how effectively the scam has worked.

For example taking our favorite company in Canada, Petro-Canada, has options that "are in the money" for $410 million. And total 2007 option based compensation (Using $53.62, their end of year price) was $82 million. Just to make sure they don't seem too greedy, they did issue $255 million in dividends. (Note this was a topic of discussion on this blog in 2006, so it is fair to say the management did know about this.).

Technorati Tags: People's, Organization, Failure, Governance, Yergin,

Why the companies.

In my last post I pointed the accusatory finger for this energy problem, at the oil and gas companies, particularly the majors. The first aspect of the accusation is that they knew, as I had pointed out, that their organizational constraints would limit their level of activity far below the market demands. This may seem a rather harsh point of view, which they should be given the benefit of the doubt about their knowing or not knowing. It was clear to many that this situation was inevitable, I was providing a solution, not identifying the problem.

The management of the companies knowing the situation would become as difficult as it is, undertook to do nothing. They were making money and would continue to do so when the prices went up. This lack of motivation to do anything was the choice of these managers. Show me a major producer that has earned any increase in their profits other then from higher prices.

Educating the public. Even today companies and their industry representatives claim to have no idea why prices are so high. What business are they in, do they mis-understand their markets so fundamentally? What could have been done in the past five years to mitigate the problems we face today? If consumers were given the real facts, would they have gone out to purchase the SUV they feel they are now stuck with? The duck and run from the truth policies of these organizations have allowed John Q. Public to walk blindly into the biggest issue ever facing mankind. The motivation to dip into the trough is strong with these managers.

In September 2003 I published a proposal to the industry to conduct the research of determining if the JOC was the key organizational construct. Given the opportunity to deal with this constructively, the industry represented by Petro-Canada, Encana, CNRL, Talisman and many others, chose to hire Cambridge Energy Research Associates (CERA) to research the idea that I proposed! Shows you the scope of what these people are capable of. And I was not dealing with some low level manager; I was speaking with CEO's of these firms. Luckily for me I was able to complete the research ahead of CERA. In publishing the May 2004 report the only question that was asked was who paid for the research? Well I did, and now I own it lock, stock and barrel.

It's been this last point that really bothers the companies. They have no desire to ever let anyone derive any value from Intellectual Property. It is since this time I have been forced to find employment in other industries. So here the industry was presented with a workable idea that made more sense then anything they had read before. (My words). And they hush it up and try to kill it. Each of these companies struggles with the inability of SAP to do any after sales service, why would they refuse any new idea? And that is the last point that these organizations are culpable for, their efforts to kill this opportunity to solve this problem before it affected the consumers.

These companies are more or less suffering from a grid-lock organization that long ago failed. Recall in 2007 even Exxon lost 10% of their production base after spending an additional $25 + billion in capital. These dinosaurs will never be able to keep up with the decline in their production base and are therefore slowly rapidly dying. So who else, other then the consumers are suffering as a result of the manager’s lack of accountability and motivation? Clearly the shareholders are at a sizable risk as they watch the managers slowly run the company into the ground.

I am calling on those investors to fund the developments of this software development project. A means for which the shareholders could be provided with the alternate organizational systems enabling them to manage their assets. The current oil company managers know that in today's business environment you must have the electronic systems in place first, or you will be relegated to manual systems to run your operation. The managers have their investors over a barrel.

How much longer will these managers be left in control will be determined by the investor class. An investor class that happens to be comprised mostly of John and Jane Q. Public, the people that are now facing the energy problem. What is needed is for them to act as I see no other alternative.

Technorati Tags: People's, Call-to-action, Organization, Research, Failure,

A different approach.

It could be argued that the focus of this research is a software product that falls within the classification of vaporware. And it does. However I would put some spin on the classic definition of vaporware and call this a clean slate approach to oil and gas systems. The category that this "product" is in is difficult to define and therefore difficult to build without the express support of the oil and gas industry. This final research report is an attempt at communicating these concepts far and wide within the oil and gas industry in an attempt to find an audience. The strength of the concept of using the Joint Operating Committee requires that every data element, every relationship, and every process be revisited and rewritten. New modules and marketplaces will be built to eliminate the old software classifications.

I am attempting to articulate a vision of what a new approach could do in the systems area. It certainly is vaporware as no group or company has ever approached the joint operating committee as the central organizational focus. How can I, as one individual, do all this work in order to make a viable system exclusively for the producers? The clean slate approach has to be communicated in a way that the system could and should be built in order to accurately describe its features.

I have identified several points that present future difficulties in oil and gas systems. Partnership Accounting, Human Resource Marketplace module, Petroleum Lease Marketplace module and the Genesys Technical Vision are the foundation of this final research report and are unaddressed by the competition. All these aspects of future software systems have to be addressed and neither SAP, Oracle or IBM have a solution or vision that is as compelling as shown in this research report.

To be more specific, the perspective of using the joint operating committee brings new and better ways of managing an oil and gas enterprise. From a systems point of view oil and gas has ignored and avoided the joint operating committee as it conflicts with the underlying purpose of the bureaucracy. Significant contradictions and conflict have crept into the oil and gas producers’ operations that results in the Joint Operating Committee being precluded from the systems used.

This project was originally proposed to the industry in 2004 as an $85 million software development project. The producer must ask itself,: isn't it more appropriate to keep your options open ? What if SAP and Oracle continue with their current offerings; will those be adequate in the future? A future with IPv6 capability? A further question that needs to be asked, and based on the work of John Hagle III and John Seely Brown, is : Are the proposed industry stratifications changing to be reflected as either innovation management, infrastructure management or customer management?
Is there an expectation or belief that the bureaucracy and its use of last century’s technologies can hold a candle to this vision? These technologies and the forces of change in all areas of the economy have to be addressed. Oil prices are up almost 300% will result in the reallocation of financial resources to support innovation. Organizations are constrained in their speed and innovativeness due to the bureaucracy and its refusal to accept the joint operating committee as the explicit form of organization. Constraints in human resources, field capacities and speed to market are real issues that jeopardize the industry.

We have consistently seen successful companies that were able to integrate technology into their strategy and form strong competitive advantages. A company such as HSBC. Homogenization on SAP is not a competitive strategy. I have now counted 12 calls to action from Harvard, Oxford Analytica, MIT, McKinsey, John Hagel III and John Seely Brown, Secretary Bodman, SEC Chairman Christopher Cox and a variety of others. Add to these calls the demands of the consumers. The time to act and put these software developments into play is now.

Ray Lane is a partner at Kleiner, Perkins, Caufield & Byers and a former president of Oracle Corporation. He knows what he is talking about. This entry will take you to a Business Week article that documents many important points. Two of these points I want to discuss in this entry, they are:

"The traditional method of selling big corporate software applications as multi million-dollar packages that take years to implement is broken."

"The 70% of startups out there that are trying to do what the big companies do, only better, faster and cheaper - it's a fools errand. The customers would like to buy that from a large company, so they’re going to lose out." Ray Lane

Surprisingly, perhaps, I think he is right on both counts. The large multi year, multi million dollar packages are the dinosaurs of the software world. Even Petro Canada tried to implement SAP and after $14 million gave up. It’s fallacious to try to retrofit the company to the software.

On the second point of Ray Lane's, stating that the startups will fail, is something that I struggled with at the beginning of this process and something that I think I can also prove is not valid in the oil and gas sector. The two points that I would assert in my defense is that I am the copyright owner of the methods and processes discussed in this research, and in the preliminary report. I published my thesis in May 2004. I have tangible evidence that the state of the art thinking was not as advanced as what I proposed in September 2003, and earned in the publication of the Plurality document.

Back in 2003 I concluded that the software vendors could consume themselves competing with new offerings and no one would have been able to secure a competitive hold in the market. The only manner in which to establish a competitive offering, I felt, was to own the intellectual property as the key competitive advantage. The copyright, and other forms of intellectual property are the only sources of value in this new age.

Secondly, if anyone thinks that a large vendor is going to be able to write the code for the Partnership Accounting, Human Resource Marketplace, Security, Petroleum Lease Marketplace module that I have spoken about in this report I think they would be mistaken in their expectations. What is needed is a clean slate approach and the heavy involvement of potential and future users. The day and age when the software innovations were brought to the industry’s door through the cottage software industry has ceased. The involvement of the industry in its software development needs is mandatory, and become an inherent capability

So on that basis I would agree and disagree with Mr. Lane. Intellectual property is the only method of securing any kind or competitive advantage in this new day and age. Those that attempt to build systems without their differentiation being codified and protected are in my opinion wasting their time. What is required to compete with this software is some fundamentally different basis of organizational structure for the software to define and support just as I have outlined here.

Technorati Tags: Genesys, approach, perspective, proposal, research

Petro Canada Q2 Earnings.

Petro Canada have published their second quarter earnings report and I have to admit that I was wrong in terms of the position I was taking on this blog. My inability to convince the industry of the needs of this type of solution had lead me to being convinced that conflict was a means to the end. In retrospect my frustration got the better part of discretion and I pursued the theme to the extreme. There is nothing more to do than to apologize to Petro Canada in the same manner the analysis was raised. I trust they will forgive me.

technorati tags: Genesys, Petro-Canada, Earnings

McKinsey Strategy Series Part III, Tacit Interactions.

"Tacit interactions are becoming central to economic activity. Making those who undertake them more effective isn't like tweaking a production line."

This article states that tacit interactions, consisting of collaborative and complex problem solving, are the primary means of future economic value. The majority of these interactions are found in western based economies and are conducted by those that earn higher salaries. The article goes on to say;

"During the next decade, companies that make these activities - and the employees most involved in them - more productive will not only raise the top and bottom lines but also build talent based competitive advantages that rivals will find hard to match."

"But building these advantages won't be easy: companies must alter the way they craft strategies, design organizations, manage talent and leverage technology."

I particularly like that "Design Organizations" bit. It implies that the need and value of the hierarchy are last century. Today the technology exists to collaborate at a basic level. In the next ten years the development of collaborative applications will enable those firms that choose to increase these tacit interactions, with "competitive advantages that rivals will find hard to match."

McKinsey goes on to better define what is meant by tacit interactions noting "the searching, coordinating and monitoring activities required to exchange goods, services and information". The developed economies are finding the volume of tacit interactions are growing faster then in any other category or job description. Making up almost half of the resources in certain industries. The developing world is not far behind and have opportunities that could match the developed worlds pace in a very short period of time.

Automation of the business process, or transactional activities, does not augment the performance of tacit interactions. How a firm may increase those tacit interactions and increase performance is not well known or defined at this point.

"But that must now change. Executives will have to learn to innovate, and manage in era when tacit interactions dominate and drive performance."

Facilitating the people within your organization to increase tacit interactions requires the management to provide the tools for their people to do their jobs. In oil and gas, I would suggest that direct participation of all members of the joint operating committee, collaborating in a virtual environment is how I see the Genesys application being developed. Each engineer, geologist, administrator and developer are there to represent their companies interest in the area. Collectively the groups are able to collaborate and have the software support their thinking and decisions with tools that handle the business end of these interactions. For example, if it is determined that a sand frac is to be used on the well the following processes would be invoked;

• the contracting firm is chosen
• a purchase order is created
• a contract is made
• the invoicing and payment for those services are completed

all as a result of the decisions made by the joint operating committee (JOC). This frees them to conduct greater volumes of interactions and innovations that are necessary to meet the market demands for energy.

"Workers engage in a larger number of higher quality tacit interactions when organizational boundaries (such as hierarchies and silos) don't get in the way, when people trust each other and have the confidence to organize themselves, and when they have the tools to make better decisions and communicate quickly and easily."

McKinsey has conducted a survey of 8,000 companies and determined that certain sectors had higher levels of tacit interactions. Within each industry the number of tacit interactions was widely variable and appears to have a direct correlation to the overall performance of the firm! McKinsey goes on to say;

"The need to move forward is both substantial and urgent."

High levels of tacit interactions were consistently show to have built substantial competitive advantages. These advantages were difficult to be replicated by competitors as their "power lies in the collective company specific knowledge that emerges over time."

McKinsey goes on further to state that these require a;

"New Management Science" and "require changes in every facet of business, from hatching strategies, to organization, to managing talent, and leveraging IT."

Readers are encouraged to read the 200+ articles in the archives of this blog to see the manner in which this McKinsey Strategy Series dovetails with what has been suggested here for the oil and gas industry. The Genesys systems that will be developed with the joint operating committee as the organizational focus. Will enable high levels of tacit interactions and collaboration throughout the enterprise, the partnership in which the JOC is represented, and the industry as a whole. The what and how this is proposed to be done is documented in this blogs archives.

Consistent with the need to revisit all aspects of the firm, McKinsey believes the role and purpose of strategy and its development take on a higher importance then they do now. This becomes the critical task of senior management to provide the overall scope of interactions and their derivative innovations. This implying that innovations occur at the front lines of the business, not in the management ranks. The means that companies use to enhance the volume and value of tacit interactions is captured in the following;

"Tacit interactions reduce the importance of structure and elevate the importance of people and collaboration. Some of these changes are already underway. In many companies people now come together in project teams, address an issue, and disassemble to start the process again by joining other informal teams. In fact this approach is common in certain professional services and engineering firms, so their organizational charts rarely reflect what is really happening in them. Hierarchy busting has been a theme in the business press for years, but the pace of change has been slow and its effectiveness questionable."

The technology that companies will need to employ is fundamentally different from those used today. In addition to the enhanced communications, these technologies needs to be brought into context for the next ten years that McKinsey suggests these changes will occur. At this point I would assert the Genesys technical vision that I have documented here, here, here and here. This technical vision is necessary for these interactions to grow in predictable ways. Key will be the asynchronous process management and its ability to mirror the unpredictability of events as they occur. This is the real key of the entire discussion of these systems.

technorati tags: Plurality, Genesys, Petro-Canada, McKinsey,

Idiots, a.k.a. Petro Canada shareholders.

What our favorite company is up to is a mystery even to themselves. As a shareholder I will be rabid when on July 27th this company issues its quarterly report. I thought that Petro Canada may surprise the market with an early release yesterday. An early release who's impact would be lessened by the lack of attention over the weekend. This is a particular vile and spineless tactic that only cowards would do. Maybe there is some hope for them yet?

On the topic of a July 27th release date. Does this late of date postpone the bad news to the absolute latest available date? After the full volume of the second quarter reports has died down, then we will hear the extent of the losses of Petro Canada.

When the noise of all the surprise announcements from all the other industries is in full song, Petro Canada will sneak a loosing quarterly under the door. This also on a day before the August long weekend. There is no hope what-so-ever for this firm.

technorati tags: Petro-Canada, Cowards, Genesys, Quarterly

Petro Canada piles it on, again.

A press release from our favorite company notes that they have increased their offer for Canada Southern Petroleum Ltd. from $11.00 to $13.00. Recall that Petro Canada was more or less disgusted with the Canada Southern Petroleum Ltd. expectations when they were negotiating with them, I wonder how the management feel now. This whole episode could probably have been avoided if the pig headed management of Petro Canada just sat down with Canada Southern Petroleum. This latest offer bumps the original offer of $113 million a whopping 73% to a total of $195 million.

I'm sorry to be the one that explains that this whole situation is taking on an enhanced perception of panic on Petro Canada's behalf. With only 55,000 shares tendered to their $11.00 offer the message to Petro Canada is more. Will Petro Canada figure that this is a game that they are not able to play and fold, or will they pull out the heavy artillery and acquire more bank debt to acquire this tiny little firm.

To the management of Petro Canada, give your head a shake, at least until it hurts. Your acting like you haven't got a clue about what your doing. The message that this transaction is sending the market is that management is running around in "fire fighting" mode. Stop it and let this bad piece of history die quietly. Now that is my advice and it hasn't actually cost you anything has it.

You have a quarterly report that will be out soon. This report is going to show how bad things really are within the company. Regroup for that public relations nightmare and forget about this Canada Southern Petroleum fiasco, your out of your league.

Start the PR machine to mitigate the effects of your loss of operational control of your flagship Terra Nova property. And the inevitable financial losses of the firm. Canada Southern Petroleum is too small to provide any cover from a PR perspective.

Technorati Tags: Incompetence, Petro-Canada, PR-Nightmare, Energy

Hagel & Brown, Pull models, Part l

John Seely Brown and John Hagel lll have written another excellent paper entitled "From Push to Pull, Emerging Models for Mobilizing Resources." (October 2005) These two researchers continue to impress me with their leadership capability in this new technology frontier. As I have stated here before, they have been pushing these themes now for over 5 years that I am aware of and continue to be the leading edge thinkers.

The final paragraph of the introduction captures much of what I believe and write about in this blog.

"By mastering the techniques required to make this new model work, companies will be well positioned to create substantial value. Those who adhere rigidly to the old model will likely destroy significant value." Hagel & Brown p.4

Contrasting the efforts of Petro Canada in this blog is designed to provide a real life example of what this blog is attempting to solve. If the "pull" model of innovation and creativity were operational in the oil and gas industry, this commentary would have achieved its objective. However, there is ample resistance to these changes. Many vested interests have aligned against these ideas and Petro Canada to me provides the greatest contrast to what this blog is not proposing. If by reviewing this Hagel and Brown document, we can gain additional insight from these two top notch researchers it will be well worth the effort.

Forces that are driving the search for alternative mobilization models, Hagel and Brown identify 5 forces that undermine the push model.

• Increasing uncertainty.

Push models require stable environments. "In today's environment it is harder to deploy resources in anticipation of demand." p.14 Oil and gas producers seem to be unable to agree on why the high energy prices persist. I believe they are a fundamental reallocation of the financial resources to encourage and reward innovation. The companies themselves seem to believe they are a temporary aberration.

• Growing abundance.

With bigger markets, involving more competitors and shorter product cycles. China and India have joined the Former Soviet Union and eastern block countries in consumer based economies. The production from these areas is substantial and the markets are immense. All of these markets will demand greater volumes of energy.

• Intensifying competition.

Outsourcing of secondary tasks like accounting. Push models are overwhelmed "by extended business processes." p.17 The authors are essentially noting the interdependent nature of the supply chains are growing longer and more diverse. I fundamentally believe that the joint operating committee configured with the proper software is the best way for the industry to deal with these "extended business processes". The complexity of the supply chain, the diversity of the offerings leads to greater opportunities for innovation.

• Growing power of customers.

Hagel & Brown cite iTunes and other applications that are effectively disintermediating large portions of distribution channels. Due to the oil and gas industry being capital intensive I don't see the risk of disintermediation, however, the efficiencies that can be had with better systems is something that the industry needs to consider today.

• Greater emphasis on learning and improvisation.

Training is replaced by coaching and apprenticeship. The retirement of the oil and gas industry veterans will need to occur after their tacit knowledge is captured.

Pull Platforms.

I believe it is a testament to both Sun Microsystems and Dr. James Gosling that so much effort and time has gone into providing Java with superior exception handling capabilities. It is not by accident that pull platforms are identified by Hagel and Brown as heavily relying on exceptions to the standards.

"Pull platforms are designed from the outset to handle exceptions, while push programs treat exceptions as indications of failure." p. 22

and then go on to say;

"Because of loose coupling of modular design, pull platforms can accommodate a much larger number of diverse participants. The more participants, the more valuable the platform becomes."

Although this may currently run against the more secretive culture of the oil and gas industry. The demands for energy are now insatiable and remove the competitive nature of the industry. This competitiveness is, I think, going to be replaced by coopetition.

Pull platforms have the following characteristics which work to encourage creation and use.

• Find

All the necessary resources are available at the critical time they are needed. The authors note WSDL (Web Service Description Language) an XML description of a resource. Just as I have noted the value in XML tags here before, WSDL provides an automated manner of discovering new resources.

• Connect

With other participants of resources as required through elaborate networks. The technologies that are available today are designed to provide greater participation. Participation with like minded groups that are able to identify and resolve issues in the oil and gas industry.

• Innovation

Provide a more flexible environment to innovate with the resources made available to the producers.

• Reflection

Recombine and improvise with much more rapid feedback regarding their impact.

I will cut the conversation at this point and pick up the rest of this document in another post starting with "Exploring the layers of pull platforms."

Technorati Tags: Genesys, Hagel&Brown, Innovation, Energy