What its all about, the user.

The title of this entry will take you to Professor Andrew McAfee's recent entry on Enterprise 2.0. Downloading a .pdf entitled "The Future of the Web." In the document Professor McAfee makes the comment

"You can bank on a ten fold improvement in the cost and capability of collaboration technologies over the next five years. What will your organization do with that?" pp. 2

A very good question, and one that should be foremost in the minds of most Users today. This entry is an attempt to provide a User Vision that can help in defining the answer to this and other difficult questions about the work of the User.

The Future of the Web

In preparing what will become a new proposal to the 135 producers, I am noting very limited differences in the applications requirements. The dropping of heavy oil from a mining point of view is the largest and most significant change. I can't help but think that something is missing from the proposal. The "thing" being an overall vision that this project has. I have attempted to develop an overall vision in the past six months, but I have not been able to quantify and qualify it. The problem this presents is I am missing the most important component of how I see the "User", as they are mostly described in this project. Both in terms of how they are involved in the day to day of the building of this software and how this software impacts the users day to day needs. Therefore this entry is to present a user vision of this project, and as a precursor to making an overall vision. When combined with the technical vision that I have put up here, these two visions should help to understand better where I think we are heading. The final vision will contain many of these specific visions.

I have presented a Technical Vision based on IPv6, Java Objects, Wireless and Asynchronous processing. The Technical Vision helps to identify the development needs and the engineering and geological possibilities. This User Vision will provide an understanding of how I foresee the Engineers, Geologists, Administrative and Management staff do their jobs and participate in developing great software. First I will need to provide some understanding of how a few technologies will be implemented and how the users will interact with them. The technologies are the "semantic web", "enterprise search" and "end-user" tools.

It is easiest to see the end user tools that will be developed within this application. A few variations exist and are good examples of what users will interact with the Genesys system. Firstly these are analytical tools that are provided to the user based on their understanding of the organization, its assets and the data provided. Genesys is a system that provides the back end processing and transaction management to run a company with interests in several JOC's. What should be a standard level of processing and reporting would be provided, however, the ad-hoc query and special interactions that users will want to determine at any time will be developed. These are provided through end user tools that will be derivative of the thinking that these four tools provide. The four tools are Swivel.com, Yahoo Pipes, Teqlo and Trendalyzer.

End user tools

Swivel
"A place where curious people explore all kinds of data." Upload your data and compare it and graph it to a variety of other data sets. Swivel is providing users with tools specifically to do those tasks, and to collaborate with people of other data sets.

Yahoo Pipes
One of my favorites, a place where you can automate some of the web for you. Expect many tools to be developed and provided of this calibre and quality. Google does this by publishing their API's (Application Programming Interfaces) to those that can use them.

Teqlo
"A Mashup Platform for everyone else", a similar tool to Yahoo Pipes but more powerful. The problem with teqlo is too many of what I call Ajax memory leaks (runaway processes) and too many requests for passwords and personal information that should not ever be given out.

Google Trendalyzer
As I indicated on Friday Marissa Mayer of Google announced Gapminder had been acquired by them for their Trendalyzer tool. Looking at raw data will become a rare exception. Analysis and tools such as these have to be put into the hands of the users so that they can interpret and develop meaning from them. This point is well put across by Ms. Mayer's comment.

Gathering data and creating useful statistics is an arduous job that often goes unrecognized. We hope to provide the resources necessary to bring such work to its deserved wider audience by improving and expanding Trendalyzer and making it freely available to any and all users capable of thinking outside the X and Y axes.

I would encourage readers to have a good look at each one of these tools and get an idea for what a productive user will be able to do with the data, transaction processing, and statutory reporting taken care of, as is proposed here in Genesys.

The semantic web

The semantic web as an interface. The next component of technology for helping to understand the user vision is the semantic web. This will be by composing simple queries to the web in much the same way a Google search currently provides. The difference will be the syntax that is followed and the results. The syntax is "subject, predicate, object". Further research is recommended for readers of the W3C website. It is a difficult concept to understand in a quick manner, and W3C does nothing to make it easy. However, data sets can be further described by associating names, labels or attributes, which is the correct term. Once these data sets have their attributes, the syntax can be used to discern meaning (the semantic part of this) that could be quickly adopted into something like Trendalyzer. The User could then apply some of their engineering, geological or management science too.

Search capability

The best description that I can come up with to describe search is that it is the closest thing to artificial intelligence that we now know. Artificial intelligence (AI) is not robots or computers that are equivalent to humans in their thinking. AI is the variety of tools that help people expand their scope of knowledge and understanding. Google does this extremely well. To conduct only a simple search with infrastructure requires massive computing power to index, store, retrieve and report. These types of tools will become more prevalent to the User as AI becomes better Google'sunderstood.

The User of this proposed software will conduct a variety of searches on the data they have access too. The access too is the difficult part when we think of 1,000's of users accessing 100,000 joint operating committees owned by 1,000's of producer companies. It is fair to assume that the domain of each user will be mutually exclusive to all other users. How then can a single user access the data they have privileges for in a manner that maintains the security and access control necessary. This is a tough aspect of this system but it can be done. Google provides their Enterprise Search tools which are a combination of hardware and software, and ultimately their algorithms would work against these data sets. Their are many other companies that provide these types of searches and are specializing in this area. A simple Google search will provide the understanding that this is a big area of concern and of research by very specialized people.

The domain of a user may spread across several producers, several JOC's, and over certain time frames. The user needs accurate data and the means to extract the information that they know exists but do not need to compile a series of reports and key the values into a spreadsheet. Most users have been doing this for the better part of a decade. The problem with this is spreadsheets are notoriously buggy and have limited access and value. Even Sarbane's Oxley notes the difficulty that spreadsheets provide. Nonetheless, how the user is to impute any value from the work they do, they will need access to the data at some certain level. With the Military Command structure being built within this project, the access to certain types of data needs to be assured as to be authorized by the right representatives of the firm. All in all a very difficult task to do. The alternative is to regress to paper and control access to the file cabinets.

Always on.

This term was used to refer to the cable modems and DSL being available at all times. Not having to dial in like a conventional modem over telephone lines. Now it means something far more sinister. Always on will mean that Users are always available. Not my or most people's idea of progress but we need to understand the technology brings the problems and the solutions. In this instance the RSS feeds and Asynchronous Process Management contained within the Genesys technical vision. These two provide the user with the ability to approach their work in a more timely and appropriate manner. The screaming fire drills of when the general ledger has to be closed will become bad nightmares for most accountants. The sense of urgency for timeliness and accuracy will still exist, however, the need to drop everything and do this, and only this, will be removed from the mindset of the user.

I like to think of this blog as a good example of this latter point. My thoughts are with me at any and hopefully all times. I have readers reading this blog from all corners of the world. (Utterly fantastic!) It doesn't matter when I post, it doesn't matter when they read the post. My thoughts and the communication of those thoughts are the driving concern from my point of view. These writings will not interrupt the readers at an inappropriate time and disrupt what their doing, they will be able to approach the writing when they have the appropriate time and motivation to review them. An asynchronous time machine if you will. In order for these systems to provide value, the ability to operate asynchronously, like this blog is considered and described to be here. I think systems of all types need to quickly adopt this type of thinking. Business does not occur on a 9 to 5 basis, bureaucracies do.

Always everywhere

One of the inherent benefits of IPv6 is the ability to register every device with its own unique Internet address. If your at a Laptop computer that is registered with the Genesys application and have authorized and authenticated yourself, then access to the system, data and information will be made available to you on that Laptop no matter where you are physically. The probability that it is not you accessing your computer is too remote for the security concerns. The same would go for your phone and whatever device may be developed to connect you to the the rest of the world. The IPv6 address is unique and secure, the system can send you information and you can ask the system from those points. If your accessing the system from a public computer terminal, your access may be deprecated in some form to ensure that no access to data or information is without the highest level of security.

A different context, a different perspective.

How much of the work that people are doing is driven by the needs of the bureaucracy or external compliance. Granted the accounting requirements are a necessary aspect of the firm. But the ability to deal with the majority of the compliance should be a natural fall out of the way that business is conducted. If you drilled a well and it discovered previously unknown commercial quantities of hydrocarbons, then the results of the drilling activity more or less dictate the compliance requirements. Why not have the compliance to the regulations be handled automatically as a fallout to the entire process.

Imagine for a moment that the accounting and tracking of information as it is produced is managed by the software. You execute a drilling contract that dictates and governs the transactions between the two firms in the market place. If we are to accelerate the activity level of the oil and gas explorers and producers are we going to need to proportionately increase the accountants, lawyers and landmen? More will have to be done by each individual. Today I think that most people have difficulty in understanding how they fit within the organization and the activities they conduct provide value to the firm. What kind of job is that? A job that is so removed from the productive process such that the individual can't see the impact their efforts make on the success / failure of the firm? How are we going to achieve the demands of the marketplace for energy in the next thirty years? We need to conduct more operations in shorter time spans with faster activity levels. Adam Smith established the division of labor was the key to increasing the economic output, how are more people going to be involved in the same process in order to achieve that increased or enhanced through put.

If we then compile the headings of these sections, we can see the User Vision that is a starting point for the user to understand the purpose and direction of these developments.

The very near future of the energy industry will see Users have the tools, data and information they need to conduct their work. Increasingly these Users will participate in the development of the systems and tools they need to innovate, anywhere, anytime and to increase the productive capacity of the producers and JOC's that employ them.

Technorati Tags: Genesys, User, Vision

A new tool.

Marissa Mayer of Google just announced "gapminder" for a preview look. What an unbelievable tool. The world will not be seen through the data elements, but through tools like gapminder. The address to this demo is...

http://tools.google.com/gapminder/

Technorati Tags: Genesys, Ideas, Innovation, Attention-Economy, Data

Project status.

On Sunday I mentioned this project was in a state of flux due to the actions of the major producers CIO's decision not to proceed. Well Popeye is back with what might be a better opportunity. Being isolated from the industry for the things I said has a tendency for me not to keep up to date. I had completely lost my window on the competition. The sale of IBM's Qbyte application, and the announced 2009 termination of support services provides an excellent market for this project to fill. If I exclude the major producers from the population of Qbyte clients, I still arrive at over 135 companies that need a solution.

Therefore a marketing approach will be developed to make this project appealing to those 135 producers. I want to spend some time revisiting the project and particularly the budget. My assumptions in preparing the last budget was for a relatively stable technology industry. Clearly with the majority of the firms looking for new systems in the near term, the time frame will be one of high demand on the resources in the technology area of the City. Therefore I will prepare a proposal to them that is based on the many things being discussed here.

Deadlines for the preparation of the proposal will be March 31, 2007 with a May 31, 2007 subscription date. Same application, same vision, same leadership, I'm enthused.

Technorati Tags: Genesys, Development, Summary, Market

Industrial Dynamics, Innovation and Development

May 6 2004

Professor Richard N. Langlois

Competition through institutional form: the Case of the Cluster Tools Standards.

Another excellent paper from Professor Langlois. This paper discusses the history of the Semiconductor manufacturing equipment and how it has evolved, particularly around the intense competitive pressures from Asia. Comparing a high tech industry to a commodity business may bring criticism. I would re-assert what Matthew R. Simmons states that the energy industry is second only to the space industry in terms of the application of science. This paper's analysis focuses on the appropriate split between the firm and market, a similar discussion to what I am carrying out here for oil and gas. A discussion that focuses on the Joint Operating Committee (JOC). Langlois takes this discussion to its ultimate objective, that of course being the organizational structure as a competitive weapon.

"Industrial economists tend to think of competition as occurring between atomic units called "firms." Theorists of organization tend to think about the choice among various kinds of organization structures - what Langlois and Robertson (1995) call "business institutions. But few have thought about the choice of business institution as a competitive weapon." pp. 1

Key to this discussion is the standards used within an industry. Within the energy industry their has been a move to standardize the data elements between producers and suppliers. This has primarily been done through the efforts of the Public Petroleum Data Model (PPDM) I have discussed here before. As a result standards in the energy industry have been established and are used by many of the engineering and geo-technical applications in this industry. This project is committed to the PPDM model as it is both international and most of the remaining work to be done is to resolve conflicts within the industry data elements. In Semiconductor's standardization was available but not used by everyone. Many of the larger "fab" manufacturers were able to establish and use their own methods of production. Through the evolution of the industry this made for some interesting positions being taken within the competitive marketplace. The semiconductor's dynamics of this structure and the changes to the marketplace as a result are interesting from the point of view of the discussion here on energy.

"Rather than a battle of the standards, the current situation might best be thought of as a battle of alternative development paths" the closed system of Applied Materials, with its significant internal economies of scale and scope, and the open modular system of the competitive fringe, driven by external economies of standardization. At this point, the forces favoring the integrated development path are more-or-less evenly balanced against the forces favoring the path of technical standardization. I analyze these forces in terms of the trade-off between the benefits of systemic innovation and systemic coordination on the one hand and the benefits of external economies of scope and modular innovation on the other Although standards have so far kept the competitive fringe in the ballgame, modularity in the industry may ultimately take a different, and somewhat more familiar, form, as some of the larger firms adhering to the standards become broadly capable systems integrators who outsource manufacturing to specialized suppliers of subsystems." pp. 1

As most people are aware the development of the semiconductor industry has been seen as a critical point in the development of nations. Here Langlois brings in a study from Berkeley to lay the groundwork of this discussion.

"In one of the few contemporary academic examinations of this industry, a study by the Berkeley Roundtable on the International Economy concluded that;

"... with regard to both the generation of learning in production and the appropriation of economic returns from such learning, the U.S. semiconductor equipment and device industries are structurally disadvantaged relative to the Japanese. The Japanese have evolved an industrial model that combines higher levels of concentration of both chip and equipment suppliers with quasi-integration between them. whereas the American industry is characterized by levels of concentration that, by comparison, are too low and [by] excessive vertical disintegration (that is, an absence of mechanisms to coordinate their learning and investment processes) (Stowsky, 1989)" pp. 3

Langlois then continues on discussing how the products are made in the semiconductor industry. This discussion is critical as background for the discussion here in the energy industry. I will pick out some of the stronger parts and make application to the energy industry later in this entry. Through analogy Langlois draws a litre of milk to the methods of keeping the semiconductor clean room. Instead of having everything "clean" for processing, and just as you would not refrigerate the entire house to keep the milk cold, the clean rooms were adjusted in size leading to new economies of scale.

"Indeed, there has arisen something of an international division of labor in the industry, partly by default. We can think of the more that 500 process steps in semiconductor fabrication as grouped into three phases akin to the steps in photo developing." pp. 5

"Instead of thinking about refrigerators, think now about dishwashers, and consider the problem of washing a kitchen full of dirty dishes. Using a dishwasher is a batch process; washing by hand is a continuous process. Loading the dishwasher may ultimately have a larger "throughput", but the first clean plate reaches the cupboard more quickly with hand washing. Batch semiconductor processing is like running dishes sequentially though many different dishwashers with many different capabilities. This creates a queuing problem, and the wafers must often sit around in WIP inventories while waiting to form a batch of the appropriate size for the next process step. By contrast, single wafer systems push only a single wafer through at a time (putting aside parallel processing steps), but the progress of that single wafer is not slowed as much waiting for other wafers to be ready." pp. 9

"Introducing a single wafer step into a batch fab instantly creates a bottleneck, of course, since throughput of the fab is limited to the throughput of the single wafer step. The obvious answer is to replicate the bottleneck stage in a parallel processing configuration. The need for parallel processing was the original motivation for common platform cluster tools." pp. 11

"Instead of running the same process in all four chambers, one could instead run different processes, using the wafer handler to moved the wafers from one to the other within a controlled atmosphere. This was the genesis of the integrated cluster tool which represents a genuine move in the direction of single wafer processing. The parallel configuration offers the benefit of redundancy, and can generate higher throughput when downtime is an issue; but as tools become more reliable, the serial configuration - which boasts superior cycles times - gains the advantage. (Lopez and Wood 2003)." pp. 12

"One way to marshal the necessary capabilities is within the boundaries of a single firm large enough to possess and wield all, or at least most of, the competences necessary to produce a cluster tool. Another way is somehow to organize and integrate through contract the competences of a number of distinct firms. The American semiconductor equipment industry uses both of these approaches simultaneously." pp. 12

"Applied (Materials) has quite deliberately chosen the opposite strategy - to develop internally capabilities in all areas of semiconductor fabrication technology. Initially, Applied did contract with firms like Peak Systems for an RTP module and GaSonics for a photoresist stripping module. Both of these arrangement generated contractual problems and were abandoned." pp. 13

This last point, "contractual problems" were earlier discussed here. This is therefore a major demarcation in this analysis of energy in comparison to semiconductor industry. The ability of the market to define the contractual basis within a market system, I have suggested exists in oil and gas. This is the cultural framework of the industry that drives the financial, legal and operational decision making frameworks in oil and gas, and the direct mechanism to operate in oil and gas is the JOC. This is also the point of conflict that I am experiencing with the CIO's of the CAPP CIO committee. The market is attempting to provide a solution, being this discussion, to solve the administrative issues of the industry. Whereas the CIO's focused on the firm are breaking down what they need to such a fine level, that $50,000 is a reasonable level of contractual requirement. Work within the industry needs to be done, and that is consistent with the understanding of Langlois, and the CIO's have failed to see this point. I would refer back to this table to see the makeup of the industry should be from my point of view. With the PPDM standards in this industry, any attempt to build systems that do not recognize the JOC would be a continuation of the forces necessary to micro manage all aspects of the industry by the individual firm. This is the reason that I attribute the CIO's are failing, and will continue to fail until they address these points.

"The emergence of standards."

"The process by which standards emerged in the cluster tool industry is rather different from those of well documented cases like the QWERTY keyboard, the VHS videocassette recorder, the IBM compatible personal computer or the 33 rpm LP record. In all of those cases standards emerged through or competition or "battle of the standards" among alternatives originally offered as proprietary schemes. In cluster tools, however, a single standard emerged immediately out of collective action with a fragmented industry." pp. 14

This last point showing a consistency between the energy and semiconductor industries. For these purposes here, there is only one data standard, PPDM in oil and gas. The value of which is well articulated by Langlois in the following two quotations. I would also add to this discussion of data standards, the copyright that I hold in the development of this research. As I have asserted I will only license one firm to develop the software for these purposes in order to focus the energy industries efforts on the one right solution. Using a shot gun approach to system development will not work with such a high level of technology being employed.

"For the moment, then, both development paths seem to be surviving, and neither is obviously driving out the other. Why? Let us pause to think about the basic economics of closed proprietary systems versus open modular ones. The primary benefits of a closed system lie in the ease of systemic coordination and reorganization. When the nature of the connections among the elements in a system are changing or idiosyncratic to application, a unified organization can more cheaply coordinate and fine tune the connections. The value of such systemic coordination depends on both technological and demand factors. In some respects, and in some technologies , the value of idiosyncratic systemic coordination may be exogenous. In the automobile industry, for example, some degree of "integrality" may be inherent in the nature of the product (Helper and McDuffie 2002) Moreover as Christensen and his coauthors have argued, an integrated organization is better able to fine-tune product characteristics to achieve greater functionality in an environment in which users eagerly demand such functionality. (Christensen, Verlinden, and Westerman 20002)" pp. 18

These are the benefits that accrue to the energy industry as a result of one software solution being built here. The focus is not diluted through the needs of venture capitalists and competition among rivals. The focus is on providing the best software solution possible to the industry in the manner that the industry defines. Langlois then shows the benefits of an open modular system. This open modular system is what I am proposing for the "market" of the energy industry. An "open" market comprised of many Joint Operating Committees.

"On the other side of the ledger, an open modular system can more effectively direct capabilities toward improving the modules themselves (Langlois and Robertson 1992). Such a system harnesses the division of labor and the division of knowledge, allowing organizational units to focus narrowly and thus deeply; at the same time, it magnifies the number of potential module innovators, and thus can often take advantage of capabilities well beyond those even a large unitary organization could marshal. In this way, an open modular system "breaks the boundaries of the firm." There are both static and dynamic benefits. At any point in time, a user can "mix and match" components from a wider variety of sources to fine-tune the system to his or her taste, and thus reach a higher level of utility or tailored functionality than pre-packaged system could offer. In the semiconductor equipment industry, this is called "best of breed."" pp. 19

"More important perhaps are the dynamic benefits. Over time, an open modular system can lead to rapid trial and error learning and thus evolve faster that a closed system." pp. 19

This is how I foresee the energy industry developing greater focus and capabilities based on innovation. The organizational structure of the JOC provides the ability to deal with the market as it needs. The market evolving essentially in response to the producers needs. This needs to be defined and built within a software structure that is the purpose of this blog. When we add compliance to the mix, I fail to see how the energy industry could continue on without the re-organization happening first, and of course that won't happen until such time as this software is operational.

Technorati Tags: Genesys, Langlois, Capabilities, Firm, PPDM, Research, Organization

"Waging the War of Ideas"

This historical and valuable book is freely down loadable from the Institute of Economic Affairs (IEA). The IEA is a think tank devoted to the ideas of Frederick von Hayek, the Nobel Prize winning economist that is the father of most economic thought in the world today. The influence of Hayek is as strong as Keynes and only began to receive public support through the policies of Thatcher and Reagan in the 1980's. The IEA has gone on to start over 100 other "think tanks" such as Canada's own renowned Fraser Institute. Spreading the ideas of Professor Frederick von Hayek far and wide.

This book chronicles the genesis of the ideas of Hayek from the publication of "The Road to Serfdom" to today. The parties and participants provide a rich history, an easy read and worthwhile review for all. The book is also a call to action for anyone to keep their eyes and ears tuned to the return of a socialist mindset and its insidious destruction of individual freedoms.

The main point of the book provides an interesting contrast to today's business environment. Although the business and political (or economic) domains are different, they share many similar faults. Today I see many of the CIO's of producer organizations taking the planning of economic action to a ridiculous level. Command and control is prevalent in the mindset of most of the CIO's in the producer companies. I would draw the parallel between what Hayek et al were battling governments for the rights and freedoms of individuals over the last 60 years. Two similar battles between the market and firms in business today. Therefore the lessons learned by Hayek et al, may provide some pertinent knowledge in how to deal with these issues today.

Specifically the bureaucracy has complete control of all aspects of the marketplace. As I have written here before, this mindset is justifying itself by way of the fact that the market has failed to provide the oil and gas producer with the appropriate number of drilling rigs, resources, systems and tools etc. This thinking has all but eliminated the market from their conscious thought of the firm and has lead to a serious decline in the performance of the industry, particularly in consideration of the market demands for energy. The appropriate division between market and firm being along the lines of the discussion as represented in this table.

Here are some of the more precise points that I would draw a parallel too. Starting off in Chapter 2 "Waging the war of ideas: Why there are no shortcuts."

"The Key strategic insights from these writings can be summarised as follows: pp. 35

"Practical people who concern themselves solely with current day-to-day problems tend to lose sight of, and therefore influence on, the long run. This is because of their lack of idealism. In a paradoxical way the principled, steadfast ideologue has far greater long-term influence than the practical man concerned with the minutiae of today's problems." pp. 36

"Over the long run, it is a battle of ideas, and it is the intellectual - the journalist, novelist, filmmaker and so on, who translates and transmits the ideas of the scholars to the broader public - who is critically important. He is the filter who decides what we hear, when we hear it, and how we hear it." pp. 36

"The main lesson which the true liberal must learn from the success of socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote." pp. 36

"Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost. The intellectual revival of liberalism is already under way in many parts of the world. Will it be in time?" pp. 37

"To summarize Hayek's message: Keep liberal thought vibrant and relevant; recognize the importance of history; be principled and steadfast; avoid special interests; eschew politics and instead search fro leverage; recognise the critical role of the intellectual; and be Utopian and believe in the power of ideas." pp. 37

The consequence of my ideas is the reality of what my life has become. The scope and scale of the task ahead is ominous and yet my situation concerns me little. In the short time that these ideas have existed (May 2004, almost three years ago) I have clearly aligned myself against the vested interests (the CIO's) of the producer groups. I have also found that my thinking is aligned with those who are responsible for the producers long term health, and those that Sarbane's Oxely identified, the CEO and CFO's. Those that have opposed these ideas are the ones that should have embraced them and made them into reality. The marketplace of offerings from the competition to this software development is the equivalent of the city of Nagasaki after World War II. Nothing exists to provide the producer companies with a reasonable opportunity to function as a firm or as a market today, or in the near future. Talk of the competitive advantages of the various IT strategies does not even exist.

The market leader, IBM, with 70% market share, sold their application in a final capitulation of their frustration in dealing with these CIO's. The chosen solutions of Oracle and SAP, the ones recommended by the CIO's are now admitted to be inappropriate for the oil and gas industry. The CIO's, and particularly those that attend the Canadian Association of Petroleum Producers (CAPP) CIO committee, have micro-managed each component of the technology marketplace for their own interests, not of the firms. This task has been such an enormous effort that it has left them with the inability to see the future and provide leadership and guidance. They have betrayed their leaders and led them down the garden path of destruction by not providing the necessary systems to deal with the changes in the markets. Irrespective of the demands for ERP, the marketplace will be difficult to satisfy with so many companies seeking solutions with so little time and resources. The CIO's animosity towards the ideas articulated here have blinded them from their own ultimate demise. Absolute power corrupts absolutely. Hayek has more on this topic.

"As long as we are not duped into believing either that the battle is won, or that we can now employ shortcuts, the future for a society (markets) of free and responsible individuals is indeed bright."

Hayek had many insights and lived a difficult life as a result of the consequences of his ideas. These insights provide some value in this instance.

• "Pro-market ideas had failed to remain relevant and inspiring, thus opening the door to anti-market forces." (Double Check).
• "Peoples' knowledge of history plays a much greater role in the development of their political philosophy than we normally think." (Check).
• "Practical men and women concerned with the minutiae of today's events tend to lose sight of long-term considerations." (Double Check).
• "Be alert to special interests, especially those that, while claiming to be pro-free enterprise in general, always want to make exceptions in their own areas of expertise." (Double Check).
• "The outcome of today's politics is already set, so look for leverage for tomorrow as a scholar or intellectual." (Check).
• "The intellectual is the gatekeeper of ideas."
• "The best pro-market people become businessmen, engineers, doctors and so on; the best anti-market people become intellectuals and scholars."
• "Be Utopian and believe in the power of ideas. (Check)."

"...the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist... Soon or late, it is ideas, not vested interest, which are dangerous for good or evil." pp. 63

Needless to say the Tailor's (CIO's) of the emperors (CEO's and CFO's) clothes had turned thumbs down on the prospect of this development going forward. Providing their leaders with nothing for the future but blind hope. The opportunity to deal with this project on a go forward basis has been rejected by them, and now the ability for them to work in this environment will be difficult if not impossible on a go forward basis. The writing is on the wall from my point of view. I have detailed the issue as I see it here in these writings, and offered a constructive solution. The CIO's have had their opportunity, now its time for others to take their place. This will go down as one of the greatest failures in the city of Calgary.

As for me I will continue to write as the opportunities are provided. I will seek employment outside of the oil and gas industry and seek other businesses that may be considered progressive in their forward thinking, ones that will not cower at the thought of something new, logical and unique. I will also attempt to appeal to other clusters of the oil and gas industry and attempt to provide similar services to those that were summarily rejected by the Canadian producers. The future in the energy industry has never been brighter, nor more challenging.

Technorati Tags: Genesys, organization, development, failure

Engineering Systems Solutions to Real World Challenges: An Overview

This video is the first of an MIT / IBM "meta" 4 part lecture series. The purpose was cited as being that real case studies are needed to acquire the "context" from the marketplace. I am tempted to say nothing to see here, please move along. But this video's presenters are so lost they are unable to see things clearly. The video almost becomes a must view to determine what / why companies fail. The two presenters are from IBM and they are;

Ms. Linda Sanford, IBM Senior Vice President, Enterprise on Demand Transformation & Information Technology.
Dr. Irving Wladawsky-Berger, Visiting Professor of Engineering Systems, and Vice President of Technical Strategy and Innovation at IBM. (Pictured)

Both of these senior executives appeared to have the future of technology all figured out. The presentation focused on innovation and the technologies used by their company to sustain them through the near death experience that IBM incurred during the 1990's. Now that IBM has survived, that somehow alleviates them from ever having to face a near death experience again.

Some of the things that were said by the presenters were true, however, they did not seem to really understand them. They were more selling something that they did not understand or care for. Such statements as "the consumer and customer are knowledgeable and know what they want." This statement is true, just as the Buffalo ran off the cliff were well aware of the threat that was chasing them, the need to follow along should be based on a thorough understanding of the marketplace. Leadership is the key criteria that industries and Buffalo need today. Following along with platitudes and surveys will only tell you so much of the story. It is also, in my opinion, highly necessary to plug in to the academic thinking that is abundant and valuable to those that use it. The presenters believe that academia is the "last to know" and "the client business partners were where the rubber hits the road" and therefore have no desire to team with academia.

The business problem that I think IBM sees, and as Ms. Sanford frequently refers to, is how the 340,000 IBM employees / consultants keep active. Clearly selling at IBM has become a pyramid scheme that I would think most consumers of their products and services would see through. Keeping 340,000 individuals involved in the client business will soon lead to a size-ably smaller staff for IBM, hence eliminating its main business problem.

In contrast I find that the presentations made by the people at Sun Microsystems provide an understanding of where they are and where they are going. The products and services are clearly in line with their vision and they are able to articulate that clearly. I would say that Sun has the bull by the horns in terms of what the technology make up is, and where the future of computing lies. IBM hasn't got a clue.

One of the most interesting things in this video is the questions from the audience. The audience seems to be seeing much of the same "out of touch" nature of the two IBM'ers, and are asking rather pointed questions that the presenters don't catch on to. Instead they answer the question in a somewhat pious manner. An audience participant asks the question, how is it that IBM will survive and be relevant tomorrow. The answer seemed to be the survival from the near death experience taught them many things and therefore, it wouldn't happen again.

Another audience question touched on Professor Carlotta Perez' theories toward change and asked directly how does IBM jump from one wave, to another. The questioner pointedly asking what it is that makes IBM think that they will be able to manage without having the academic influences in the future. And how could a firms future death experience be avoided, without the ability to understand where the next innovation comes from. Explicitly asking how would IBM find the innovation without the influence of the academic community? Still no response from the presenters that they understood the questions.

The point that I would make regarding this is that the people who have survived IBM are now eligible, based on the age of the two presenters, for retirement. And are going through the motions to keep the company active until their pensions are fully vested. Literally, this is the only reasonable conclusion that you can see in this sad and otherwise useless video.

Professor Wladawsky-Berger stated with regard to Linux, when the market says "it's time for you to go," was the justification in eliminating AIX from the market space. Time will favor this approach for IBM. Eventually each product and service will be told by the marketplace "it is time for you to go", and they will pick up their pencils and have a healthy retirement. In thinking this, I am presented with a blog entry by Endless Innovation noting that Professor Wladawsky-Berger has indeed announced his retirement from IBM.

The presenters state they are very sensitive to the marketplace and are on course to survive. "The job of smart people is to find comets that will wipe you out and prepare the firm for the threat." IBM appear to me to be the threat to themselves. I guess the news is that IBM no longer has any smart people in the 340,000 strong base of employees, either figuratively or literally.

Technorati Tags: Genesys, Innovation, Perez

The globalization of the Software industry: Perspectives and Opportunities for developed and developing countries

The title of this entry will take you to ideas.repec.org to download this interesting working paper.

Authors;

Ashish Arora
Heinz School, Carnegie Mellon University, Pittsburgh

Alfonso Gambardella
Sant' Anna School of Advanced Studies, Pisa, Italy

A quick review of this document reveals that the focus of the research is on developing countries software industries. Not really on topic with the research being done on organizations, however, it has provided some interesting academic support for the purpose of this project. Speaking in the conclusion of this document the authors note some interesting points of view that we may not have realized or found in our regular research travels.

The set of quotations are:

Some authors have argued that software is to the knowledge based economy what capital goods were to manufacturing - an input source whose importance for productivity and innovation was far greater than was reflected in revenues or share of GDP. Software does supply basic inputs to virtually every industrial sector. pp. 30

There may be some advantages to hav(ing) a domestic software sector which could tailor software to local requirements at lower costs. pp. 31

The software industry can act as an exemplar of a new business model that features flatter organizations, individual incentives, competition, and export orientation, particularly for other sectors that rely upon skilled workers. pp. 32

The study reviewed India, Ireland, and Israel (What it refers to as the three I's), China and Brazil against the American, German and Japan industries. A very good read for the purpose of better understanding the impacts of globalization on the software industry.

In terms of the three quotations, neither of these points, that I am aware of had been mentioned before. Yet these show clearly why the oil and gas industry must proceed with this project. Software is an effective tool for them to exercise new and innovative methods of finding and producing oil. Yet, I hear nothing with respect to the industry willingness or desire to proceed.

Technorati Tags: Genesys, Organization, Software, Strategy, Reference

Electronic Hierarchies and Electronic Heterarchies: Relationship-Specific Assets and the Governance of Inter-firm IT.

This article provides a brief description of the particular research area of each professor.

Professor Andrew McAfee
"His research investigates how information technologies from ERP systems to prediction market facilitate structured and unstructured multi party interactions, and the roles that general managers play in extracting the maximum value from their firms' IT investments.

Professor Marco Bettiol
"His research is focused on innovation processes and on the role of information and communication technologies in sustaining the competitiveness of small and medium enterprises.

Professor Maria Chiarvesio
"Her interest is to investigate how industrial districts SME's and local development systems are taking advantage of network technologies to face the challenges of internationalization and innovation in the new global competitive scenario.

January 2007

I had a lot of difficulty getting this specific post out, the only reason I can think of is the quality of the material. I think there is a lot of material here to build upon. My apologies for the length of this post, but reviewing it will help to understand the future of the energy industry and its Information Technology. It was in an attempt to be brief that I removed much of the analytical work around the three hypothesis of the authors. These did not necessarily fit in a clear and concise way, therefore, for brevity I removed those sections. Review of the actual document may be of value to all readers.

Abstract

This paper is directly in line with our discussion regarding the oil and gas industry. The use of the Military Styled Command and Control, as I have termed it, is necessary to offset the decline of the hierarchy. An organization requires structure to organize its resources. To eliminate the hierarchy, and not replace the command and control structures with something else would be highly and immediately destructive. McAfee et al state the following in their abstract;

"This argument introduces a contingency into the "electronic markets hypothesis, "which holds that greater use of IT is uni-directionally associated with reduced use of hierarchies."

and

"The paper therefore argues that when enterprise IT is required, so is an electronic hierarchy: a collaboration in which one member has all required decision rights over jointly used IT." pp. Abstract

Introduction
Recall our recent discussions on Winter's et al and Langlois' et al work regarding the boundaries of the firm, the division between markets and firms. How the capabilities and governance of a firm was being revised to optimize the technologies. To summarize that discussion I wrote this summary.

In this document, this conversation is being carried on and extended by McAfee et al with a predominant IT focus.

"Another important stream of research has focused on the boundary of the firm, analyzing whether greater diffusion of IT makes it more or less attractive to distribute economic activity across markets rather than within a hierarchy."

and

"This latter stream of work has largely converged to the conclusion that "By reducing the costs of coordination, IT will lead to an overall shift toward proportionately more use of markets - rather than hierarchies - to coordinate economic activity." (Malone, Yates et al. 1987). This has come to be known as the electronic markets hypothesis (EMH), and is broadly accepted; one review (Sampson 2003) found only a single conference proceeding that "queried the myth of diminishing firms." Variants of the EMH were articulated both before and after the explosion in business use of the Internet." pp. 1

"This paper aims neither to reinforce the EMH nor to refute it, but instead to introduce a contingency into consideration of IT's impact on the organization of work. (pp. 2) The appropriate governance mechanism for an IT facilitated collaboration, we argue, is contingent on the type of IT being deployed; when an enterprise technology is required, so is an electronic hierarchy". pp. 2

"So as enterprise IT becomes important, electronic hierarchies become the norm. This paper uses the term electronic hierarchy rather than simply hierarchy to convey that collaborators in such an arrangement do not surrender all (or even most) of their decision rights to a central authority. Instead, they surrender only a small subset, namely decisions about the configuration of jointly used enterprise information technologies. And to emphasize that this paper concentrates on governance rather than price-setting, electronic hierarchies are contrasted not with electronic markets but with electronic heterarchies, which are collaborations in which decision rights over jointly used technologies are not vested with any single party." pp. 3

I am going to continue using the Military Styled Command and Control Structure metaphor in this blog. The "Electronic Hierarchy" as McAfee calls it does not provide that much of a visual or rich environment for the future user of this software. The MSCC.

The precursor to this software's development is the success of SAP in most industries outside of the energy industry. SAP provides that "electronic" hierarchy, and command and control, such that SAP is the bureaucracy." (Cox, 2004). The validity of the McAfee et al argument is the difference between success or failure. A system built on the Joint Operating Committee without the hierarchy being recognized and built into the system would not provide the energy producer with the command and control necessary to operate. It is therefore important at this point that we quickly re-introduce the Military Styled Command and Control (MSCC) structure that is an inherent part of this software solution. With a collective industry wide ability to recognize and adhere to the command and control structure offered to us by the MSCC, this application provides the underlying speed and innovation of the producer in a controlled manner.

The Electronic Markets Hypothesis

Not to be confused with the Efficient Market Hypothesis, McAfee et al define the EMH as

"By reducing the costs of coordination, IT will lead to an overall shift toward proportionately more use of markets - rather that hierarchies - to coordinate economic activity." (Malone, Yates et al, 1987).

This definition resonates with this projects purpose and builds support for the use of the MSCC. In the table provided, the segregation of items between the market and the firm helps to understand why and how the future oil and gas producer will operate and function. Here, in this comprehensive quote, McAfee states that markets provide better opportunities for enhanced economic activity.

• "IT reduces coordination costs"

"Malone, Yates et al. 1987, however, maintain that "An overall reduction in the "unit costs" of coordination would reduce the importance of the coordination cost dimension (on which markets are weak) and thus lead to markets becoming more desirable in some situations where hierarchies were previously favored. In other words, the result of reducing coordination costs without changing anything else should be an increase in the proportion of economic activity coordinated by markets". pp. 4

• "IT assets have low relationship specificity."

"In contrast, the circumstances under which IT favors hierarchies over markets, as articulated by previous research, seem comparatively limited. They include situations where. Network externalities exist and monitoring is available."

"However, the increase in monitoring capabilities brought by IT is an improvement along a dimension where hierarchies are comparatively weak. All other things being equal, then, this improvement thus makes hierarchies comparatively more attractive. Baker and Hubbard 2004 found that US trucking firms became more likely to own trucks and employ drivers, as opposed to contracting with individual truck owners, after improved driver monitoring technologies became available." pp. 5

I need to list this as a direct call to action. The future is uncertain, however, the manner in which the future unfolds needs to be defined in appropriate organizational structures. The Joint Operating Committee is that coordinating structure, McAfee et al state that it needs to be explicitly recognized in the information systems used by the producer. Enabling these coordinating capabilities within the software will allow improvements in economic performance.

The "Move to the Middle Hypothesis".

Not satisfied with the first part of this document, McAfee et al take on some more with this move to the middle hypothesis of theirs. Operational Decision Making in oil and gas on a global basis is on the participants represented by the Joint Operating Committee. This is a global culturally induced fact. The inherent nature of the risk profiles of companies and the areal extent of oil and gas operations are the primary reasons that most oil and gas wells, gathering systems and facilities are jointly owned and represented by the JOC.

...other considerations intervene and lead to organizational forms that are less fluid than spot markets. pp. 5

The "move to the middle" hypothesis concerns the size and stability of IT based multi firm collaborations, and does not address their governance. This paper meanwhile, focuses on governance, in particular the allocation of decision rights within IT enable multi firm collaborations. This focus appears to be unique in the literature on inter organizational IT. pp. 5

I have imputed before that the oil and gas industry has a distinct advantage in moving towards the JOC. The advantage is the JOC exists and is culturally, financially, legally and the source of operational decision making. This is also the reason that the SAP, Oracle and IBM styled solutions have failed to provide the systems that producers need. Those systems are not even aware of the JOC.

"Empirical support for the EMH"

McAfee then draws an explicit and relevant example to support the EMH.

The emergence of the Linux operating system is perhaps the clearest example that complex and economically significant products no longer need to be developed within single firms or traditional industrial alliances. The can instead result fro the collaborative, voluntary, and minimally directed efforts of individuals around the world who use IT both to execute their work and to discuss it. pp. 7

Today the Windows Operating Systems has been one of the largest software development ventures every undertaken. Billion of dollars have been invested and as this video shows, failed. Yet Linux and Mac OS X, a derivative of the Berkeley Development Systems Unix are more robust, cheaper, and safer. Yet these two competing operating systems are developed by users that have a passion and a drive to get what "they" need from an OS. The oil and gas industry producer needs a comparable capability to develop the software that it needs.

"Empirical anomalies"

Looking to define the EMH can also be derived from other situations and experiences. McAfee et al do this effectively with the two examples that they cite.

• "Of the 1500 B2B exchanges founded, the great majority no longer exist. This hypothesis, however, does not explain the paucity of some kinds of electronic link between customer firms and their small, stable supply networks." pp. 8
• "The failure of public eMarketplaces could be interpreted as support for the move to the middle hypothesis. pp. 9
• Finally, a dedicated empirical evaluation of the EMH yielded equivocal results. Hess and Kemerer 1994 studied the impact of computerized loan origination systems and concluded that "despite a decade of experience with these systems... the industry has not been fundamentally change"and conclude that "the [electronic markets] hypothesis will require augmentation in order to fully explain [our] results..." pp. 9

The implications of relationship specificity

McAfee et al, to my possibly biased opinion, I think have highlighted an appropriate success of the EMH in the operating systems available today. The B2B exchanges and markets should have worked, as there is really no new technology that was since available to the developers of the B2B exchange. But with all things technology, this time it's different. The use of XML as the appropriate means to integrate the hierarchy and structure of a transaction was not well used or implemented in the late 1990's. McAfee points to the type of relationship that B2B exchanges were attempting to conduct. And, if I understand him correctly, the transactions needed to be built within the exchange "and" the (in this instance) the producer.

This paper argues that the mitigating phenomenon is the relationship specificity of some types of inter-firm information technology. While certain technologies are easily redirect-able from one use to another, others are not. The relationship specificity of information technologies is an important consideration, and is proposed here as the required augmentation of the EMH, because it appears to be impossible to write complete contracts of IT.

The authors continue on with the logical argument that IT based transactions are attempting to emulate complex human environments. This ability I would argue is now possible and is one of the clear reasons that I am pursuing these possibilities.

High rates of innovation among IT producers and high levels IT investment among rivals combine to create a complex, dynamic, and uncertain environment. pp. 10

...but it can be done, and should be done in my opinion. This next quotation (verbatim) gives one of the reasons why.

If a shared asset is not redirect-able, however, the theory of the firm holds incomplete contracting to be a critical consideration, and has a clear prescription. As Hart 1989 says "one thinking I can be sure of is it ...assets are sufficiently complementary, and initial contracts sufficiently incomplete, the two sets of assets should be under common control." Asset complementarity and asset specificity are, for the present purposes, equivalent concepts. An EDI connection between two firms, for example, is a relationship - specific asset. Equivalently, the configured hardware and software requires at each end of the are complementary assets. The link as a whole, in other words, it a specific asset; the endpoint are complementary assets. pp. 11

Recall the works of Winter's and Langlois' and the table above. The complexity of interactions becomes the problem in that transactions can not be defined to the level necessary to conduct all of the possible permutations and combinations of them. This is where the JOC, which "IS" the legal and operational decision making frameworks of the energy industry, succeeds in providing value to the IT enabled producer. The codification of these explicit ways and means of operation are dependent upon those key attributes defined within the JOC. The Penalty clauses, the Overhead Allowances, the Decision making frameworks have all been defined by the industry over its history. The ignorance of these points by my competitors SAP and Oracle is they are essentially trying to retrofit a transaction within the firm, when the transaction should be made by the market.

The prescription articulated by Hart is widely accepted (see, for example, Williamson 1985, Grossman and Hart 1986, Hart 1988, Hart and Moore 1990, and Klein, Crawfor et al. 1978) because scholars have identified failing in both the formation and the adaptation of non-hierarchical organizational forms when both asset specificity and incomplete contracting apply. pp. 11

The failing that is being spoken of in this quotation points to the difficulty in this area. Hart points out the failure in industry in general, and with respect to the energy industry which has asset specificity and incomplete contracting represented in the JOC, the failure that has occurred in oil and gas is the inability of the systems vendors to explicitly recognize the JOC as the key industry construct. Or in other words the failure for the producer occurs not because of the difficulties of asset specificity and incomplete contracting but the lack of recognition of the JOC.

Formation
To provide some further support for what I have just indicated in the previous section. McAfee et al note the following;

"Initial scholarship on the theory of the firm (Coase 1937) highlighted that complex transactions among peers in a market were characterized by high levels of haggling and learning. When negotiating about a relationship-specific asset peers might attempt to define a complete contract even when one is not possible, or might engage in extra-contractual "side bargaining". Extensive haggling and learning delay the point at which a shared asset is put to productive use." pp. 12

Those with direct experience in oil and gas will now completely understand my point of view on this difficult topic. The JOC, because of its asset specificity and incomplete contracting, have defined contracts to this level. Pick up a CAODC "Drilling Contract and one can see the codification of the entire efforts of the industry over its lifetime. This codification inherently identifies the assets specificity, its deficiencies regarding incomplete contracting and implicitly the JOC. The IT systems recognition of these critical points does not exist, and that is why I call SAP and Oracle's solutions failures in the market.

Adaptation

If a group of peers overcomes the obstacles to forming a collaboration that makes use of a shared IT asset, they face another set of challenges as they attempt to adapt over time to disturbances in the environment. Williamson 1991 segments such disturbances into two categories: those for which prices serve as sufficient statistics, and those that "...require coordinated responses lest the individual parts operate at Cross - purposes or other wise sub-optimize." pp. 12

According to Williamson, hierarchies are better at adaptations where price is not a sufficient statistic: "As compared with the market, the use of formal organization to orchestrate coordinated adaptation to unanticipated disturbances. pp. 13

The unambiguous prescription from the theory of the firm is that if an inter-group information technology is a relationship - specific asset over which complete contracts cannot be written, it should be governed by a hierarchy with a single decision-making authority. pp. 13

A priori the JOC and the price system of markets.

A Technology Categorization

So which inter-group information technologies, if any, are relationship specific? Email, instant messaging, and Web browsers seem to their users to be almost infinitely redirect-able - which technologies aren't? pp. 13

The same is not true for the technologies listed at levels 2 and 3 in Table 1. They require complete and precise ex ante agreements about the data that will be exchanged and , if a multi-step process is to be executed, the "flowchart" of the tasks, sequence, and possible branches and termination points of the process. These complete agreements are required because the technologies at levels 2 and 3, which are referred to here as enterprise information technologies (EITs), involve the exchange of data between information system or modules. As the mythologist Joseph Camble remarked, "Computers are like Old Testament Gods: all rules and no mercy." pp. 14

implementations required an average of 21 months ( Configuring an EDI or XML link means determining the family of transmission that will be sent across the link and the exact syntax and structure of each. Configuring ERP involves defining the data the system will contain and the business processes it will facilitate, then "populating" the system to reflect these choices. Configuration is detailed and time - consuming work. A study found that ERP Hitt, Wu et al. 2002), and a case study revealed that 19 months were required to establish a single XML link between a large manufacturer and its distributors. (McAfee 2004) pp. 15

This is because the two car-makers are virtually guaranteed to have very different internal information systems and data structures, a phenomenon referred to as the "corporate household" problem (Hansen, Madnick et al. 2002, Chen Funk et al. 2001. Some scholarship on technologies such as EDI appears to assume that the definition and promulgation of level 2 standards by industry-level and inter-industry bodies will eliminate or at least reduce the household problems, thereby allowing redirect-ability. Detailed investigation of how EDI is actually implemented, however, reveal high levels of standards fragmentation and idiosyncratic configuration (Swatman, Swatman et al, 1991, McAfee 2003) and the exercise of power to force compliance with a convenient, rather that a universal, standard (McNurlin 1987). pp. 16

Not to highlight my competitors SAP and Oracle, (oops Oracle is listed as just joined) but note the Public Petroleum Data Model that is summarily ignored by ERP vendors. This latter point of Oracle now being a member of PPDM. 

Electronic Hierarchies and Electronic Heterarchies

Table 1 provides a basis for defining an electronic hierarchy:

"An Electronic Hierarchy is a groups of participants desiring collaboration, one of which has enforceable level 2 and or level 3 decision rights." pp. 38

In this work the term "market" appears to have two meanings: a forum in which buyers and sellers come together and the forces of supply and demand affect prices (the primary meaning of the word in many dictionaries) and demand affect prices (the primary meaning of the word in many dictionaries) and a group of peers without any controlling authority.

Which is consistent with the point of view of this software development.

An Electronic Heterarchy is a group of participants desiring collaboration in which level 2 and level 3 are not vested with any single party." pp. 18.

A pretty clear definition, I think, of the differences between operator and non-operator in oil and gas, and of how using the JOC would mitigate many of the administrative issues within the oil and gas community.

A groups of peer firms transacting on a spot basis, or the set of firms that make up an industry, on the other hand, constitute an electronic heterarchy. pp. 19

and

It is important to stress that these definitions for electronic heterarchy and electronic hierarchy concern only decision rights over level 2 and level 3 IT. pp. 20

Standards Bodies

I have spoken of the PPDM organization and I should mention the numerous other organizations that provide standards within the oil and gas industry. In Canada the, Petroleum Accountants Society of Canada (PASC), The Canadian Association of Petroleum Landman (CAPL), Association of Professional Petroleum Engineers, Geologists, Geophysicists of Alberta (APEGGA) and many other organizations provide standards for use in the oil and gas industry. These standards make up a large portion of the culture of the industry, and due to the unique nature of the industry, as noted in this entry, these provide substantial value to a system integrator such as this project. However McAfee et al also point out one of the possible pitfalls.;

A number of standards bodies, some governmental and some industry-financed propose level 2 and or level 3 standards. If such as standard were to be widely accepted with 100% fidelity, that at least some enterprise technologies could move from relationship-specific to redirect-able. Two factors, however, mitigate against this vision. First, standards bodies are themselves fragmented, overlapping, and proliferating (Chari and Seshadri 2004) so a single pure standard is unlikely to emerge. Second, firms in practice appear to take work of standards bodies as a starting point for their integration work, modifying proposed standards as required to suit their idiosyncratic needs (for a case study of this, see McAfee 2004). As long as this is the case, configured enterprise technologies will continue to be relationship-specific investments. pp. 34

Conclusion

This paper presents a continent theory of the impact of IT on the organization of economic activity. In contrast to the EMH, the theory hold that in some circumstances electronic hierarchies will predominate. The theory, however, is silent about when enterprise IT (EIT) is required. It is not yet clear when, if ever, electronic heterarchies using network IT (NIT) alone are at a competitive disadvantage vis-a-vis electronic hierarchies using both NIT and EIT. pp. 35

The two categories of electronic hierarchy and electronic market clearly do not capture all of the existing modes of governing IT-based collaborations. pp.36

This paper was recently published by the Harvard Business School. Recently means February 13, 2007. It is a very topical and timely discussion of the many things that were being actively discussed in this blog. Markets and firms, Production and Transaction costs, Capabilities and Governance to mention only a few. If the energy industry is to glean any value from this body of research work, it will occur forthwith and immediately as a result of my efforts over the past 15 years. Recall that serendipity and luck are two attributes that I am grateful for. However, should industry pass on the proposal I have submitted regarding this software development proposal, then I would be hard pressed to determine a more appropriate time and opportunity then now to provide to the CEO's and CFO's of the major oil and gas producers. Since the deadline for the subscription deposit has passed, I would think that a reasonable period of time be provided in terms of grace, and then I will have to make another more comprehensive proposal to those that have signed their lives away through Sarbane's Oxeley.

Technorati Tags: Genesys, McAfee, Military-Command, Capabilities, Innovation, Harvard, Research

Photos Courtesy Troels Myrup

Ray Kurzweil, always a worthwhile speaker.

Ray Kurzweil is back on MIT Video. I wrote about Mr. Kurzweil on his last video performance at MIT. A very entertaining video and I highly recommend everyone go and view it.

Mr Kurzweil is the author of the Best Selling book "The Singularity is Near" as well as many others. Mr. Kurzweil debates with Professor David Gelernter of Yale the when, if, what and how of computer processing, and will it attain the level of human intelligence. A debate that provides new information regarding the capabilities and the definition of artificial intelligence.

Mr. Kurzweil suggest that the benchmark processing power of machines will emulate the human mind around 2029. He is careful not to suggest that this means a machine takes on a level of consciousness, but has attained the same level of performance of the human mind. If I understood him correctly, machines are providing an enhancement to human intelligence today, and that is what he means when he talks about artificial intelligence, an augmentation of capabilities for the human mind, with 2029 machines being produced with human like levels of performance.

Kurzweil's position is a reasonable point of view about when and how machines will achieve human like intelligence. Professor Gelernter wants the Turing test to be the ultimate test of human like performance and seems to insist on machines attaining levels of human consciousness. Something that he insists, rightly, will probably never happen.

The reference to 2029 by Kurzweil depends on the logarithmic and exponential growth in information, knowledge and processing power. He noted that knowledge was now doubling each year, with acceleration from the point where we are at now, what will be required in 2029 seems impossible, however, the acceleration is driven exponentially and logarithmically, whereas people think of the future only from the point of view of their historical experience, or as Kurzweil puts it linearly.

To me the debate is somewhat of limited value, Professor Gelernter appears not to be debating something he believes and hence his arguments fall somewhat flat.

The second video of this MIT series is very interesting particularly from the historical point of view. Professor Jack Copeland of the University of Canterbury, New Zealand. His discussion of the Turing Test and how Alan Turing solved the German Enigma machine in World War II. He continues on documenting interesting points of Turing's life and the impact that his Turing has had on the computer industry. A very worthwhile set of videos that provide very interesting views of the past and future of the computing industry.

Technorati Tags: Genesys, MIT, Video, Interests, Capabilities, Ideas

McKinsey, Global Trends in Energy

This excellent article is subtitled "Energy and materials companies face a demanding future." They must start preparing for it now.

McKinsey Consulting have written a new entry in their "Energy, Resources, Materials: Strategy Analysis" entitled "Global Trends in Energy". Noting that we face a rather disruptive decade in which

"change and uncertainty as a combination of six macroeconomic, social, and business trends reshapes the competitive landscape."

And

"executives in these sectors will have to confront difficult strategic, organizational, operational, and technological choices".

I would certainly subscribe to these points and would boldly suggest the place to do that is here on this blog and the time is now.

The six macroeconomic trends include:

• Booming demand for energy.
• Basic materials resources.
• Shifting of supplies to remote and geopolitical unstable locations.
• Heightened security of the environmental effects of production.
• Consumption of energy and materials.
• Increasingly large capital investments needs at a time of regulatory uncertainty.

Such is the challenge we face today. This list accurately reflects MIT President' Professor Susan Hockfield comment that energy is now in what she considers a "perfect storm". Outside of World War II, I can't think of a more difficult time for the energy industry. McKinsey goes on to suggest

"Recently, McKinsey sought to identify the trends that will make the world of 2015 a very different place to do business from the world of today. In all, we identified ten of them: macroeconomic trends that will transform the global economy, social and environmental trends that will change the way people live and work, and business and industry trends that will generate new management approaches and business models. All ten will affect the energy and materials sectors to a certain extent, but we believe that six will shape their future and therefore deserve special attention."

In the area of human resources McKinsey defines a particular point about the demand for petroleum engineers;

"In the oil industry, the demand for petroleum engineers and development engineers could almost double over the next decade, and the hunt for scarce reserves will place commercial deal makers in high demand. It is a matter of concern that a shortage of experienced project managers who can handle complex capital projects (such as oil platforms or pipelines) may create bottle-necks that will determine whether multibillion dollar projects are finished on time and on budget."

A comment that I have made repeatedly in this blog regarding the increased volume of work necessary for each barrel of oil will increase, not decrease. The earth scientists and engineers are critical to the discovery and production of oil and gas. McKinsey closes the discussion with the excellent point;

"Executives who wish to exploit these trends must keep a watchful eye on them and be ready to respond swiftly to their implications."

And as McKinsey note in the above subtitle, the time is now. The scope of this problem is large and quite well quantified by their projection that $4.3 trillion dollars in capital expenditures from 2005 to 2030 will be needed for oil alone. In a related article, "Making the most of the world's energy resource" Mckinsey states

"New research... reveals that global energy demand is on a path to grow by 2.2 percent a year over the next 15 years."

The demand for energy has never been higher. The energy industry has never disappointed the market, and I don't expect them to do so now. Industry must organize themselves for these challenges and renew their focus on speed and innovativeness within their organizations. I agree the time is now and the place to start organizing is here, with this blogs software developments.

Technorati Tags: Genesys, Call-to-Action, McKinsey, Innovation, Trends

Scale without Mass: Business Process Replication and Industry Dynamics.

Written by;

Erik Brynjolfsson, MIT Sloan School

Andrew McAfee, Harvard Business School

Micheal Sorell, Harvard Business School

Feng Zhu, Harvard Business School

August 29, 2006

This is the first of two articles I noted earlier, that Professor Andrew McAfee co-authored. As I also indicated he writes a blog that provides some value to the entire Enterprise 2.0 term that he originally coined. I find the title they have chosen here resonates with the work we are doing here. However the title makes it is difficult to discern what they are talking about. The idea that software can be reused to replicate successful business processes across industries without the mass that would generally be involved in populating the industry with the new idea. Simply software Scales without Mass.

Application of Enterprise 2.0 principles indicates the use of Web Services. I tend to think that Web Services encompasses all the transaction processing and social network systems used within a commercial enterprise. The scope of the application that we are building is this, with the upstream energy industry as its focus the separation of the transaction processing from the content management components is not desired or functional. The two need to be available simultaneously, such that the users decisions, actions and directions are followed through on the transaction processing side of the system. I would hesitate to guess that I would be in disagreement with the authors in that I would suggest the scope of an Enterprise 2.0 application consists of more then their definition.

The authors start off with a number of case studies that they use in this research working paper. This is where I digress from their Enterprise 2.0 classification. My suggestion would be that there doesn't currently exist an Enterprise 2.0 platform operational today. The wiki's and blogs that are part of both of our definitions are possibly the limit of their case research. Nonetheless this has substantial value for review and comment in this blog. Starting off they indicate;

In a series of case studies, we find firms to more rapidly replicate improved business processes throughout an organization, thereby not only increasing productivity but also market share and market value. pp. 1

We find that a positive relationship has existed since the mid - 1990's between an industry's IT intensity and its levels of turbulence and concentration growth. We hypothesis that this is the case because IT has become a means of embedding business innovation, then replicating them across an increasingly large intra-firm "footprint". Today, managers can scale up their process innovations rapidly via technology without the degree of inertia historically associated with larger firms. In other words, they can achieve scale without mass." pp. 2

I have asserted on many occasions that the upstream oil and gas industry has a high level of IT intensity. Since it is now competing on the basis of the earth sciences and engineering, this intensity will increase with the continuation of Moore's Law, and higher volumes of processors being manufactured. Denoting a golden era of abundance of processing at continually cheaper rates. Irrespective of the future processing capabilities the oil and gas firms. The industry has spent heavily in these science areas and will continue to do so. The golden era of processing power will also provide the commercial side of the energy business with new opportunities and activities that McAfee et al are discussing in this paper. If an industry's "IT intensity leads to turbulence and concentration growth" as the authors suggest then those that are able to acquire these resources and skills have secured new and expanding competitive advantages. These competitive advantages are the purpose of this development project discussed here. The faster the processes are developed, the quicker they can be rolled out to those that are able to use them. McAfee's point here is that software can scale quickly without the mass and inertia that many have grown accustomed too over the past twenty years.

When a software engineer improves a sorting algorithm in an database management program, a digital copy of that improved process can be instantly copied and included in thousands or even millions of copies of the next release of that program. pp. 4

"It is easy to see the power of replication in these purely digital domains. But economic impacts also derive from business process changes that involve technology, people and physical products. pp. 4

IT can also assist with the propagation of other types of innovation; technologies such as email, instant messaging, groupware, information portals, blogs and wikis let employees share information and ideas widely and, in many cases generate them collaboratively. Like Enterprise Information Technology (EIT), these technologies are also tools for replicating valuable business innovation, albeit ones that are less formal or structured than entire processes. pp. 6

and

It is important to note that business process replication is perfectly consistent with decentralized decision rights, and with local innovation. In many cases, the myriad small innovations and improvements generated by line employees are collectively more important that any centrally conceived business process changes. pp. 7

Even with EIT, process replication can be difficult. Commercial EIT and the Internet have lowered many technical barriers, but other impediments exist. Business process design and deployment is organizationally challenging, as is the imposition of greater monitoring.

and

Across these investigations, a consensus emerges that the observed failures have organizational root causes, not technical or budgetary ones. As one review of the literature concluded, "...extant empirical research supports the assertion that economic and technical considerations are unlikely to feature prominently when IT fails to deliver." (McDonagh 2001). pp. 7

"Organizational root causes." Thankfully the energy industry has determined the Joint Operating Committee is their key organizational construct. This alleviates them from the onerous task that many industries will now conduct to determine what their optimal structures are. However, this does not relieve the energy industry from some serious pain nonetheless.

As difficult as intra-firm propagation of novel business processes can be, propagating them across firms is typically far more challenging. The process configuration that works well in one firm might not transfer well to one with a different culture, set of pre-existing routine, mix of incentive, asset base, and approach to human resources. Empirical research show that many beneficial managerial practices are not universally diffused across firms (Bloom and Van Reenen 2005) and highlights the importance of complementarities in explaining the difficulty of diffusion (Ichiowski et al. 1997)

and

This work suggests that the boundary of the firm is a significant barrier to the diffusion of IT-enabled work changes. This conclusion is supported by research on the heterogeneity of workplace reorganizations in the presence of IT (Bresnahan et al. 2002) and by research that reveals large differences in firm - level outcomes such as productivity growth even after controlling for IT investment (Brynjolfsson and Hitt 2000). pp. 8

First, the theory asserts that while knowledge is non-rival, it is at least somewhat excludable (Romer 1990). That is, trade secrets, path dependence, intellectual property protection, and other mechanisms combine to give the generator of new knowledge the ability to at least partially exclude others from its benefits. Second, new growth theory maintains that knowledge based competition tends to become monopolistic over time (Romer 1992). Increasing returns to knowledge, a cornerstone of new growth theory, implies that leading firms will build up significant advantages over their rivals such that they become monopolies. This idea is consistent with the insight that information itself can create economies of scale because of its relative ease of replication (Wilson 1975). Monopolies are not eternal, however, because of a third stylized fact labeled "creative destruction" by Joseph Schumpeter. Competitive equilibria are repeatedly disturbed by innovation and new knowledge; consequently, new ways of working displace old ones. Outcomes and end states, as a result, become very difficult to predict (Romer 1994, Arthur 1996). One result that can be anticipated is that, as competition revolves increasingly around knowledge, Schumpeterian creative destruction becomes increasingly pronounced. pp. 9

We argue, however, that IT-based capabilities such as business process replication and standardization, monitoring, and remote collaboration are just as likely to be beneficial to larger firms.

and

This hypothesis is consistent with White's speculation that "Improved technologies of managing and monitoring may have helped overcome the inherent difficulties of managing larger organizations (Williamson 1967) and thus encouraged larger enterprises" (White 2002).

and

Our broad hypothesis is that because the capabilities IT delivers are valuable, difficult to acquire, and often transient, IT in recent years has become the opposite of a competitive leveler, or a "cost of business that must be paid by all but provides distinction to none" (Carr 2003). pp. 10

This suggests that assets and people are all the same. Which of course is not the case. How a firm, a producer and an individual would approach the Genesys application in this context would be different in terms of their needs, skills and capabilities. I can assure you that they manner in which I use Goolge would be fundamentally different then what most people understand of the resource. I would further refute that a homogenization is progressively more difficult to carry out for sophisticated tasks. As the hardware and software concepts increase in complexity, and their speed of implementation provides those that are aware and can accommodate them, can and will accelerate their business position over those that are not as quick.

That is, the volatility of market shares increase as the total IT stock in the industry increases. pp. 12

As a result, firms are able to more rapidly and completely replicate their innovations in business processes, achieving scale without mass. Other types of IT, such as email, knowledge management systems, wikis, and instant messaging allow firms to propagate innovation that are less structured than entire business processes (McAfee 2006). IT makes it possible for better techniques and processes to become rapidly known and adopted throughout the organization. pp. 19

We show through a formal model how this process can lead to increased turbulence and concentration. In particular, competition becomes increasingly Schumpeterian as innovators are able to leverage their best practices to rapidly gain market share. At the same time, competitors and new entrants have the opportunity to more rapidly leap-frog and displace leading firms. Our model is consistent not only with the increase in productivity growth since the mid-1990's but also with the higher levels of turbulence. Furthermore, as predicted by our model, concentration levels have also increased in IT intensive industries, an outcome that is not consistent with other explanations for higher turbulence. pp.19

and

Further research could also help determine the duration of IT's competitive impact. pp. 20

Professor Sydney Winter had some additional comments that are in the vein of what these authors are discussing. The document is the Economics of Strategic Opportunity and these following quotations provide some guidance regarding the homogenization of an industry. (Italics for emphasis.)

The resource allocation decisions that shape the path of advancing knowledge are necessarily made, at each point of the path, on the basis of the limited knowledge then available. Surveying available knowledge from such a vantage point is like surveying a landscape on a hazy day. Some things are close enough to be seen clearly, other remote enough to be totally invisible. The intermediate conditions cover a broad range and are complex to describe. In that range, the verdict on the visibility of a particular feature depends crucially on what definition of "visible" is chosen from a range of plausible alternative. Similarly, whether something is to be regarded as "known" or not will often depend on what one chooses to mean by "known" and why one cares; ultimately it depends on the degree of indefiniteness concerning details that is regarded as consistent with the thing being "known".

and

Visibility across the landscape of productive knowledge is arguably an even more complex phenomenon than ordinary visibility. A particularly complex type of haze arise from the fact that, in all sphere, practical knowledge consists in large measure of knowledge of how to try to find solutions to problems that have not previously been encountered. pp. 19

Thus, decisions near the knowledge frontier are made in the face of a lot of haziness about the details and significant uncertainty as to how the general picture will develop down the road. ... ...Thus, decisions are made in a haze that arises partly from exogenous constraints, but is partly a chosen response to a recognized trade off between thinking and doing, between analyzing prospects and making progress. pp. 20

There is a substantial theoretical literature on induced innovation, though the attention devoted to it falls far short of what it deserves. Most of it models the problem in a recognizably mainstream style, with a logic that parallels quite closely the standard analysis of choice of technique. This is unfortunate, since it means that the limitations of standard production theory are extended into a domain that could potentially afford an escape from them. Evolutionary modeling in the area has mostly been done incidental to other purposes, and has not been featured in its own right. pp. 22

Technorati Tags: Genesys, Winter, McAfee, Organizations, Research

Innovation and Talent in the Indian IT industry.

John Hagel III has written many good articles and topics on the effects of IT on organizations. Through his writtings he has also introduced us to many other good authors like Professor Richard Langlois'. Today Hagel has posted a great blog entry that accurately captures some of the technical risk that I anticipate we will experience here in the oil and gas industry. The conclusion he comes to at an Indian IT conference reinforces the division of labor theories of Adam Smith. I had noted the number of individuals that were involved in drilling a well, from the Chairman of the Joint Operating Committee to the billing clerk at the water trucking company would expand in their numbers to facilitate faster and more abundant and effective economic output. Hagel states the same thing for business in general and states that the Indian development community will need to address this problem. His conclusion is stated here;

These efforts in turn would expose the Indian IT service companies to the challenges of coordinating activities across large networks of partners given existing IT architectures. By gaining firsthand experience in the limitations of these architectures, Indian IT service companies would be well-positioned to drive another wave of innovation in IT architectures. In my talk on Web 2.0 at NASSCOM, I suggested that Indian IT service companies are natural candidates to define and deploy fundamentally new IT architectures that work from the “outside-in”.

In contrast to traditional IT architectures that emerged in the center of the firm and imperfectly extend their reach beyond the boundaries of individual enterprises, we are in desperate need of IT architectures that start with the assumption that the task is to coordinate activities across hundreds, if not thousands of firms. By starting with this perspective, we would need to re-think the nature of transactions and define roles and governance processes accordingly. In fact, we would likely move from today’s transactional architectures to much more helpful relational architectures designed to support enduring and deepening relationships across individuals and institutions.

I think in order to achieve this there needs to be a Military Styled Command and Control structure to replace the hierarchy. One that provides the flexibility of many firms working together to achieve common objectives. Flexibility to have staff of all the associated firms with the knowledge of who conducts what and at what level of authority. This intermixing can then, and only then achieve the types of results that we are all seeking here.

Technorati Tags: Genesys, Langlois, Hagel, Military-Command, Software, Organization