Professor Langlois' Slides

I've been reviewing some of the material that I gathered when I was looking into Professor Richard N. Langlois' writings. Going slowing through the slides that he produced for his "Economics 486, The economics of organization" course reveals a number of very interesting nuggets. I can't technically recreate the slide, and I do recommend that everyone download and study this rather comprehensive and valuable information that Professor Langlois has included in the file. Slide number 21 deals with measurement costs. Recall that we are discussing the role of the firm and of markets. And the "production" costs are being handled by the market and the "transaction" costs help to define the firm. To give you a good understanding of the oil and gas application of Langlois' theories I would refer again to the table that I prepared.

Now as for slide number 21, is this just me cluing into something that is generally known or understood, or is this something more then than that? The text of the slide is as follows;

"Measurement Costs."

Here Langlois is noting that if the costs to measure and negotiate the terms of the transaction are too high, then the role of prices will be established by firms and not markets. Not a great description but I am trying to get to an obscure point here.

"Consumers seek attributes of goods, not goods themselves."

This is where the obscure point starts. If I said that I was to go grocery shopping, I would say that I was not just buying food, but I was buying high quality goods at reasonable prices that meet my discerning tastes. The key words being "high quality", "reasonable prices" and "meeting my tastes". I could go into a Safeway and buy what I want and I would be able to more then satisfy my needs using just those three specific attributes.

"Costly to measure attributes."

I can see how a grocer would need to determine his pricing. How much product does he get, Oranges are rare due to the crop freezing, the amount of wastage and spoilage incurred by the shipper and the customer, and finally what the store will cost in terms of overhead. This can't be calculated for each Orange and therefore depends on the market for the price determination. The point being that the ability to standardize the attributes would help to establish the market pricing. Note information is what the market provides the consumer, grocer, distributor and farmer, and that is the role of markets.

"Level of buyer sorting depends on variability of goods."

The buyer will have to deal with what is provided. If the quality or price is not to his liking then they will not buy it, and leave it for the next consumer. The market information being generated here by the buyer and seller is significant.

"Sellers may reduce variability to lower buyers' search costs."

If the Safeway were located in affluent neighborhoods it would be inappropriate to attempt to sell products that are of low quality or bargain pricing. The buyer may be minimally challenged by price and therefore will look to other attributes to choose. Again markets provide information, and if their costs to transact are too high, then the firm is the optimal choice. For oil and gas the important component to consider is the level of standards that support the market. These standards mitigate the costs of completing transactions.

"Net price goes down when excessive measurements reduced."

The grocer and the consumer will share their information indirectly through the pricing and purchasing of each individual Orange. This information is being communicated through the price, set by the market.

OK so we have travelled along way to state some pretty basic facts. And I will attempt to tie these points into what I am seeing.

Attributes of goods are what consumers seek, not the goods themselves. In a market where standard means and measures, glossaries of terms, default contract templates, like those in oil and gas are able to communicate, facilitate and support the markets ability to establish price and other information to the oil and gas producer purchasing / selling them. That is to say that the majority of the work that can and should be done within oil and gas ideally should be by the market. The oil and gas industry has established many of these market supporting components of standard etc. in the variety of non-profit and non-governmental organizations that make up the industry.

I am now taking a hard left turn, so try to stay with me. In databases the table is called entities, and the columns are named attributes. And that is consistent with the information that is stored in database. The "Oranges" table is made up of volume, price, grade etc (attributes). In XML (which is a key technology in discussing databases) "Elements, which are the building blocks of XML documents, are bounded by start tags and end tags that may hold content, or may consist of one empty-element tag," and, "Attributes are name-value pairs that may appear in a start-or empty-element tag." Confused, don't be. Simply XML here is being used to portray the information contained within the database, which uses standards, and for the purposes of communication of those elements to the data user.

Thanks for keeping with me to this point, I hope its been worth your while. Here is what I am thinking that may be my new epiphany, and I hope it is for most people, and not just me.

If we, as I have suggested in my table that I noted earlier, wanted to move to a market orientation, according to these facts as I have laid them out, we could establish a functional market for those areas that are under the domain and administration of the joint operating committee. There is only the need to build this according to this "theory" we have all the parts and pieces that will make the JOC function as we expected it to do.

Going back to the proposed development, and particularly the Petroleum Lease Marketplace, the critical data attributes that are available and can be queried and searched. These data elements are well developed, what is needed now is to create the virtual Petroleum Lease Marketplace I have proposed here. Imagine for a second that you were trying to secure the petroleum lease rights in an area that you believed through geological mapping and seismic to be of particular value in a zone of your specialty. By reviewing the PLM you would be able to find out what was available, with whom, for how long. Or you would then be able to post the land and prepare for a bidding based on new reserves valuations and pricing. A PLM being a virtual marketplace of Leases, partnerships, joint ventures and farm-in/out, companies that want to do business, and companies that may want to sell their interest. All within a virtual environment that is search-able and leads to the necessary transaction processing that will eventually become the producing field. And here is my epiphany, because the marketplace can be supported in this manner.

Technorati Tags: Genesys, Langlois, PLM, Market, Ideas, Development

Collaborative Advantage

"The days of U.S. technological domination are over. The nation must learn to thrive through working with others."

Leonard Lynn
Hal Salzman

Blog Summary

I found this kicking around on my hard drive. I had apparently downloaded it from the Kauffman Foundation a while ago, a copy of this document can be secured by selecting the title of this entry. Collaboration is clearly a key attribute of how work will be done in the future. Collaboration facilitated by technologies that are available today provide competitive advantages, and different methods and means of completing work. This article suggests the American dominance in technology leadership is waning. How the U.S. can regain the leadership position they once enjoyed is suggested in this article is through collaboration. This document takes a critical look at the realities of globalization for the U.S. Based here in Canada, much of the same feelings of the need to compete is shared by most. We have lost some of our leading position, however, the U.S., and to a lesser degree Canada, were in need of a competitive challenge. Competition is good, and we are faced with some formidable competitors in a globalized world. This document focuses on collaboration in the sciences and technology, and specifically noting the role of engineers in providing the means for North America to compete.

It at times seems that the differences that made North Americans unique are fading quickly. Whether or not a reconciliation of the standard of living of all people is in force, most people would concur with this documents premise and hypothesis. The authors note;

"It is not that the new globalization has gone unnoticed. Many observers are concerned that the United States is beginning to fall into a vicious cycle of disinvestment in and weakening of its innovation systems. As U.S. firms move their engineering and R & D activities offshore, they may be dis-investing not just in their own facilities but also in colleges and regions of the country that now form critical innovation clusters. These forces may combine to dissolve the bonds that form the basis of U.S. innovation leadership." pp. 75

Were these challenges demand driven? Or, has the scientific and engineering capability to conduct most of the high end complex tasks what made North America so dominant? Or was it the freedom and liberty were being released in the former communist nations, that is now rising up to challenge the west? I think it is the latter, that with China in 1978 and the Former Soviet Union (FSR) since 1989, can now focus on quality of life issues and be less concerned with controlling their populations. The authors seem to think that some of the ways in which business had been conducted has been exploited by other countries. In an open society that is what will happen, and did happen to the benefit of all people. Although losing these competitive attributes is possible, the competitive focus they unleash is both the purpose of an open society and the key to its future.

"Strategies that may have served U.S. firms in the second generation globalization will not work in the third generation world. The new emerging economies are an order of magnitude larger than those that emerged a generation ago, and they are today's growth markets. Nor does the United States, despite its undeniable strengths, enjoy global dominance across the range of cutting-edge technologies. More-over, U.S. multinationals are weakening their national identities, becoming citizens of the countries in which they do business and providing no favors to their country of origin. This means that the goal advocated by some U.S. policy makers of having the United States regain its position of leadership in all key technologies is simply not feasible, nor is it clear how the United States would retain that advantage when its firms are only loosely tied to the country." pp. 77

These comments may appear to resonate more with a protectionist mindset then with a more globalized point of view. It also seems to state a wanting for a greater share of a smaller pie then sharing a large pie to a certain extent. If the third generation globalization ties into Professor Carlotta Perez's theories, the third generation is the point where the benefits are soon to arrive. Dr. Perez made that call just recently. So the installment period as she described has been made, and thankfully we had a large and growing China and India to help sustain the world through this transition. It is also necessary to point out that what fuels this activity is the oil, gas and coal industries. These resources are constrained due to the global demand, and are potentially a hindrance to the progress of the world economy. The only manner that the energy industry can meet this demand is to re-organize for this challenge. This reorganization has to be made explicit through the software that defines and supports the structure. We should be less concerned about the losses of competitiveness and focus more on how they can be solved collectively.

The authors offer some of the ways in which the past competitiveness of the U.S. market is slipping away. In these four categories I can clearly see that the authors are not offering a means to stop the hemorrhaging of the U.S. economy. But offering constructive ways in which the U.S. can participate in the global economy and compete.

The Bandwagon Syndrome.

"As U.S. multinationals join the bandwagon of offshore technology development, they often seem to go beyond what makes economic sense." pp. 77

The Snowball Effect.

"The more that U.S. multinationals move activities offshore, the more sense it makes to offshore more activities." pp. 77

The loss of Positive Externalities.

"Some multinationals are finding that if their technology is developed offshore, then it makes more sense to invest in offshore universities than in domestic universities." pp.78

The Rapid Rise of Competing Innovation Systems.

"Regional competence centers or innovation clusters in the United States grew haphazardly in response to local market stimuli. China, India and other countries are much more explicitly strategic in creating competence and innovations centers." pp. 78

"Rather, the United States needs to develop new strengths for the new generation of globalization. With U.S. and other multinational firms globalizing their innovation work, emerging economies developing their education systems and culling the most talented young people from their huge populations, and communication technologies enabling the free and fast flow of information, it is hard to imagine the United States being able to regain its former position as global technology hegemony." pp. 79

"No amount of science and engineering expansion will restore U.S. technology autarchy. Instead, a new approach - collaborative technology advantage - is needed to develop a vibrant S&T economy in the United States." pp. 80

Policies for strength,

"We believe that the government, universities, and other major players in the U.S. innovation system need to work toward three fundamental major goals:" pp. 80

• "The United States should develop national strategies that are less focused on competitive, or even comparative, advantage in the traditional meaning of these terms, and are more focused on collaborative advantage." pp. 80
  
• "To start, the nation needs to counter the bandwagon and snowball effects that are driving the out-sourcing of the technology in potentially harmful ways." pp. 80
• "Designers of Tax Policies at all levels also can redirect policies in these directions." pp. 81
  
• "To a large degree, the U.S. patent office serves as the patent office for the world." pp. 81
• "As a second goal, the United States need to help create a world based on the free flow of S & T brainpower rather that a futile attempt to monopolize the global S&T workforce." pp. 81
• "Immigration policies that support global circulation would allow easy short term entry of three to eight months for collaboration with U.S. based scientists and engineers." pp. 81
• "Finally, in working toward the first two foals, the United States needs to develop an S&T education system that teaches collaborative competencies rather than just technical knowledge and skills." pp. 81
• "Our finding suggest that it is not the technical education but the cross - boundary skills that are most needed (working across disciplinary, organization, cultural, and time / distance boundaries)." pp. 81

Finally as part of the conclusion of this paper, "the enhanced communications within and between organizations". In oil and gas the consistency of motivation between the members of a Joint Operating Committee (JOC) resonates with the recommendations of this paper. The science, technology and engineering is the focal point of those JOC members. It is their backgrounds and scientific interests. The JOC has the operational decision making capabilities, however, it must retard these processes for the various bureaucracies to sign off on the plan. Its time to stop placing the bureaucrats at the centre of the organization and adopt this papers recommendations. And it is my opinion that the start of this change would be to develop the software as part of the solution to our long term economic well being.

"Our research suggests that the new engineering requirements, like the old, should build on a strong foundation of science and mathematics. But now they go much further. Communication across disciplinary, organizational, and cultural boundaries is the hallmark of the new global engineer. Integrative technologies require collaboration among scientific disciplines, between science and engineering, and across the natural and social sciences. They also require collaboration across organizations as innovation emanates from small to large firms and from vendors to original equipment manufacturers. And obviously the require collaboration across cultures as global collaboration becomes the norm. These requirements mandate a new approach not only to education but to selecting future engineers:colleges need to recognize that the talent required for the new global engineer falls outside their traditional student profiles. Managers increasingly report that although they want technically competent engineers, the qualities most valued are these other attributes."

Technorati Tags: Genesys, Call-to-Action, Engineering, Science, Trends

Format change.

Taking a little time off this past week to reflect on the past three months research. I had completed a good chunk of what I have to do, and spent some time reviewing what has been discovered. The difficulty and the pace of the research were a bit too much for my liking and I think that is also reflected in my writings. I am particularly pleased with the writings of Professor Richard Langlois in determining the division of the market and firm. (The summary table is located here.)

The difficulty in reviewing so much information is that the ease of reading has been lost. Although I will continue to use this blog to secure the intellectual property that I feel is necessary to support the basic hypothesis. The manner in which the writings will be completed will change for the future. I will now in addition to the posting, summarize the key points of the entry in an opening commentary. The abstract or summary will provide the reader with enough of the necessary information to see if they desire to read on. I hope this helps in making this research more usable by the growing population of people visiting this site. I am pleased with the numbers of visitors and the growth. I think with a little more effort on my behalf it should make their experience better.

I would also point to the del.ic.ous and Google Reader columns at the side of these posts. For anyone interested in oil and gas, and information technologies, there are some very high quality information and writings there. The search for quality continues and I hope that this blog becomes the focal point for most people that are interested in innovation within oil and gas. I will also be posting many smaller items that I think require special notice. These will consist of a quick summary and introduction to other articles, videos and podcasts. One last point regarding tags and labels. It may seem redundant to being posting to both Technorati tags and Google for labels, however, using the labels limits the tags to this site exclusively, where as Technorati tags will aggregate any and all blog tags. Any other comments or suggestions would be greatly appreciated. So with that we resume regularly scheduled writing on Monday. And most of all thank you, I know I've enjoyed myself.

Technorati Tags: Genesys, Writing, Langlois, Summary

Globalization at the turning point: A Perspective from the great surges model.

Professor Carlotta Perez has been one of the many Professors that I keep a close eye on. Her work is in the area of long wave economic theorists. Defining two distinctive periods of time marked by change. The installation period, and the deployment period. I found this abstract to a seminar that she is holding at Sussex University. Within this abstract, she calls the current time period as the "Turning Point between the two periods." A very important point in time.

Abstract:

Though Schumpeter himself emphasised the double agency of the entrepreneur and the financier in the innovation process, neo-Schumpeterians have generally neglected the role of finance in technological diffusion. The great surges model proposed by the author addresses these complementary roles and suggests that the propagation of technological revolutions has historically involved two distinct periods of two or three decades each: The Installation period, led by financial capital and characterized by radical innovations or creative destruction and the Deployment period, led by production capital and marked by processes of expansive growth that could be termed “creative construction”. After indicating the differences with Schumpeter’s long wave model, it will be argued that, at present, the diffusion of the ICT revolution is at the Turning Point between the two periods. The world economy would be in a phase of instability, imbalances and income polarisation, calling for institutional changes as profound as those of Bretton Woods and the Welfare State, which enabled the full flourishing of the previous technological revolution, that of mass production and its “Fordist” paradigm. On this occasion, due to the nature of the “Knowledge Society” and the flexible ICT paradigm, much institutional innovation would need to be at the global level. Thus, seen from the great surges model, globalisation would be at the crossroads choosing a path between two extremes in the current “space of the possible”: between creating the institutional conditions for a global “golden age” that would be a positive-sum game for all countries, developed and developing, or letting the short-term criteria of the financial world continue to guide investment towards what is likely to result in merely “a gilded age” of polarised incomes, very uneven growth and an incomplete realisation of the wealth generating potential of the ICT paradigm.

Carlota Perez is Professor of Technology and Socio-economic Development at the Technological University of Tallinn, Estonia, currently Visiting Senior Research Fellow at CERF (Cambridge Endowment for Research in Finance), Judge Business School, Cambridge University, and Honorary Research Fellow at SPRU. Originally from Venezuela, where she served as Director of Technology Policy at the Ministry of Industry, she is also an international lecturer and consultant, specialised in the social and economic impact of technical change and in the historically changing conditions for growth, development, innovation and competitiveness. As such, she has worked for various public and private organisations, for major corporations and governments in Latin America, North America and Europe, as well as for the EU, the OECD, the UN and other international agencies.

For many years she has collaborated with Chris Freeman in the study of long waves and techno-economic paradigms

Carlota Perez’ articles from the early 1980s and her book Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages (Elgar 2002) have contributed to the present understanding of the relationship between technical and institutional change, between finance and technological diffusion and between technology and economic development. ISBN 1843763311

Technorati Tags: Genesys, Perez, Call-to-Action, Trends

Change artists; Stories from the Real World: CEOs, CIOs and Change

HP in cooperation with CNN and CIO Magazine have produced a series of videos focusing on change, and particularly technological change in organizations. Click on the title of this entry, registration is necessary to review the videos, and I highly recommend it.

A particularly interesting video is the Chevron CTO Don Paul talking about his business. If only we had such progressive forward thinking leaders here in Calgary.

Technorati Tags: Genesys, Video, Development, Innovation

Enterprise search and security.

In the User Vision I noted the ability to search the domain of the user. A far easier thing to say then it is to do. Consider for a moment the number of companies within the industry. Consider the number of Joint Operating Committee's (JOC's) they participate in, and then consider the number of users that will be involved in preparing and using corporate data. Access to the user's domain when they may fulfill different roles in different JOC's for different client companies, one begins to see the issue regarding their ability to search for their information.

The idea that search and security would be linked would have seemed oxymoronic a few years ago. How could search maintain and build upon the security of a Service Oriented Architecture (SOA) such as the one being written about in this blog. Firstly the top priority of any development and operation of any application of this type is the quality, integrity and security of the data that is being used by producers and users. At the same time search will become an indispensable competitive tool for any oil and gas producer. Access through extensive, state of the art search technologies is a critical requirement for the oil and gas producer and user. Another critical issue is the users expectation of near single shot relevancy being provided by search giant Google. A little review of the features of the technological architecture as it is proposed here is as follows.

Authorized access will be granted to users through the world wide web. Recall that the use of a private network using IPv6 provides enhanced security that is inherent in the protocol. The producers will also access their applications from the Grid that is owned and operated as a service by Sun Microsystem. Hosting of the Genesys application by Sun provides a level of third party reliability and security that is necessary for the application. Genesys will focus on research and development of systems, not compete with Sun on infrastructure.

Each producer will have a virtualized Solaris environment on the Grid, Ingress Open Source Database Instance, and Genesys Application Server all operating side by side with other producers, possibly on the same processor. This will provide, and it stands to reason that firewall and other security requirements are already in place, each producer will access their, and only their application and data. In addition each virtualized environment will have a Google Enterprise Search Appliance maintaining the access, control list, search security, and search index's. Information about Google's Enterprise Search Appliance can be found here, and their Enterprise blog here. Information on Sun's virtualization of Solaris is here.

Deciding between money, time, and / or quality, as with any system development you are entitled to two of these objectives at the expense of the third. In the case of search security, and security in general time and quality will be at the expense of money. Although the Solaris user and Ingress user accounts are free as they are open source, they do command large fees for services of operation, the Google Search Appliance is also relatively expensive.

I found a website and consulting firm that has dedicated themselves to enterprise search and security. Idea Engineering have a newsletter that provides the necessary discussion of many of the issues companies will need to address in the future. I am highlighting a series of articles they wrote in a series of newsletters that provide value for the readers here. The series of articles are here, here and here.

A couple of the assumptions that I am operating under should be stated explicitly. We have design freedom in terms of how the application is built. Secondly, we have the cost of 1 Million Instruction Per Second (MIPS) of processing power is now $0.01 (processor costs only), enabling intense, yet affordable processing capability. Think encryption, virtualization of each producer each employee, heavy and multiple indexing algorithms and access control lists, processing demand will be very high. Add the unique perspectives that are part of this blog like Military Command Structures, Single Sign On (SSO) which is a necessary feature.

Lastly the manner that I see this application being built is through the ultimate users. What I would like to see happen is that a discussion around these points fill in some of the detail and ferret out the finer points and issues. It is the users application and their involvement is being called on for this critical issue.

Technorati Tags: Genesys, User, Vision, Data, Search, Security

Professor Whitesides, on MIT Video

This video has an interesting point of view, one that states the United States will at least be challenged for leadership in science and technology. Professor Whitesides suggests that areas such as K - 12 education need to be amended to accommodate the ways that academia and corporate research are undertaken.

Two of the important points that he suggests is that the Chinese have a very low cost structure. This cost structure extends in all areas of their economy and includes research. Noting the Chinese also have very large foreign currency reserves that could be used to help sustain the long lead times necessary in research. This provides them the opportunity to challenge and possibly lead the world in research and science.

Professor Whitesides notes that energies problems will require science and technologies to advance to solve these issues. I would suggest that this is correct, the problems are many, they are diverse in nature, and are key to a countries competitive position. I have suggested here that the oil and gas industry needs to aggressively employ the sciences in order to meet these challenges. I have also suggested that the tie in to the academic community is necessary. As Professor Dosi has suggested technology influences science, and science influences technology. Industry and academia need to be working together. And to do this effectively I believe industry needs to reorganize themselves for these purposes around the Joint Operating Committee. A bureaucracy will most certainly fail in these critical energy challenges.

The question and answer session in the last half of this video is a must watch as well. The participants for this presentation are the who's who in terms of who is interested in providing solutions to these issues.

Technorati Tags: Genesys, Knowledge, Research, Engineering, Science

What I would do.

In the instance of having some companies with qualified opinions on their financial statements. If this project was proceeding as it should, I would have struck a committee of the large accounting firms to discuss what would be necessary to ensure that the companies had unqualified opinions next year. And then set out to do just that.

The source of this problem is the sale of Qbyte last year by IBM. The new vendors gave notice that it would not support Qbyte after 2009, and therefore has put the energy companies in a situation where on a go forward basis they have to qualify their opinions in the financial statements.

Why did IBM sell? Their frustration with the industry to do anything with their systems on a go forward basis was discussed many times in the past. What were they to do? I can't blame them in the least.

The industry reaps what it sows.

Technorati Tags: Genesys, Team-Failures, Call-to-Action, Alternative

Annual Report Season

Canadian Natural Resources Ltd have filed their 2006 annual report. Within its financial statements there is a small qualification of managements opinion on internal controls. But first lets go back to 2005 to see what they wrote.

The accompanying consolidated financial statements and all information in the annual report are the responsibility of management. The consolidated financial statements have been prepared by management in accordance with the accounting policies in the notes to the consolidated financial statements. Where necessary, management has made informed judgements and estimates in accounting for transactions that were not complete at the balance sheet date. In the opinion of management, the financial statements have been prepared in accordance with Canadian generally accepted accounting principles appropriate in the circumstances. The financial information elsewhere in the annual report has been reviewed to ensure consistency with that in the consolidated financial statements. Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable assurance that transactions are appropriately authorized, assets are safeguarded from loss or unauthorized use and financial records are properly maintained to provide reliable information for preparation of financial statements.

PricewaterhouseCoopers LLP, an independent firm of Chartered Accountants, has been engaged, as approved by a vote of the shareholders at the Company’s most recent Annual General Meeting, to examine the consolidated financial statements in accordance with generally accepted auditing standards in Canada and provide an independent professional opinion. Their report is presented with the consolidated financial statements. The Board of Directors (the “Board”) is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls. The Board exercises this responsibility through the Audit Committee of the Board. This committee, which is comprised of nonmanagement directors, meets with management and the external auditors to satisfy itself that management responsibilities are properly discharged and to review the consolidated financial statements before they are presented to the Board for approval. The consolidated financial statements have been approved by the Board on the recommendation of the Audit Committee.

And for 2006

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 15(d)-15(f) under the United States Securities Exchange Act of 1934, as amended. Management, together with the Company’s President and Chief Operating Officer and the Company’s Chief Financial Officer and Senior Vice-President, Finance, performed an assessment of the Company’s internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management, together with the Company’s President and Chief Operating Officer and the Company’s Chief Financial Officer and Senior Vice-President, Finance, has concluded that the Company’s internal control over financial reporting is effective as at December 31, 2006. Management recognizes that all internal control systems have inherent limitations. Because of its inherent limitations,internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006, has been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report presented with the audited consolidated financial statements.

Well who would have thought, sounds like a systems related argument that has been discussed here many times. I'll let you know of whom's head I see rolling down 5th Avenue first.

Technorati Tags: Genesys, Governance, Call-to-Action, Failure

Technology, Entrepreneurship, and Inequality

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

David Ulph UK government, London, UK

February 2003

This paper has some interesting insights as to the makeup of the skilled vs. unskilled workers within oil and gas. The number of unskilled workers in the energy industry is very small. Weather it is in the offices of downtown Calgary or in the field, the level of skill is generally very high. Since we are primarily concerned with the head office staff we can focus just on that "high skilled" group. The research done by these authors provides a good understanding of how the energy industry as it stands today, may evolve.

"This paper develops a model that compares some implications of the rise of these new industries with the traditional organization of firms and sectors based upon the large integrated companies of Chandlerian memory (Chandler, 1990). Our model yields three main insights.

The contrast of the authors in terms of firms is very high. To compare the Chandlerian firm with its structured hierarchy and emphasis on process and regimen, vs., the purely entrepreneurial company that can best be summarized as a Silicon Valley firm. And the two types of workers that are employed at each type of firm. The Silicon Valley skilled vs. the unskilled in the Chanlerian firm are fundamentally different.

"First, our two archetypes - Silicon Valley and the Chandlerian firm - entail two different degrees of inequality between the earnings of the skilled and unskilled workers." pp. 1

"Second, apart from skill-intensity, a notable feature of the new industries is that they entail knowledge externalities." pp. 1

"Third, our model shows that the marginal effect of an increase in the relative supply of skilled people on the total income (and therefore on the total output) of the economy is always higher in the equilibrium where the new industries dominate vis-a-vis the other. The intuition is intriguing as it is a natural upshot of inequality. If the skill premium is higher, then as the marginal unskilled worker becomes skilled, the raise in her income will be higher than if the economy was in the less unequal equilibrium" pp. 2

Which is the logical conclusion to the use of their model. Creating an equillibrium that is unique to the situation, and that is reflected clearly in the next quotation.

"Put simply, German skilled workers, with potential employment in companies like BMW, Bayer or Mercedes, have higher opportunity costs of setting up their own firms vis-a-vis Indian or Israeli engineers." pp. 4

With so much to lose by taking a risk as an independent machinist, it would be foolhardy to attempt entrepreneurship in a country like Germany. And in India it may be the only manner in which a highly skilled machinist could exercise the value of their skills. I would suggest that the equilibrium of highly skilled workers in the energy sector provides little incentive or disincentive for the worker to take a risk in an entrepreneurial fashion. Therefore a mix of both contracting and employment approaches exist for a person to being hired in oil and gas. With some companies such as Encana employing a 50% employee 50% contractor human resource strategy.

"Our model shows that a large relative supply of skilled people is likely to imply a higher total income in the Silicon Valley equilibrium vis-a-vis the one dominated by Chandlerian firms. This suggests that, as the relative supply of skills rises, skilled people may "direct" technical and organizational change towards the formation of new firms and industries that are skill-intensive, rely on knowledge externalities, etc., whereby their inventive capabilities can be best exploited." pp. 5

Well that is music to my ears. The high skilled labor would "direct technical and organizational change towards the formation of new firms and industries." I would normally be on the verge of describing this research as a call to action.

Conclusions

"In sum, the large Chandlerian firm has been a notable shield against inequality across skills for many years. At the same time, the knowledge spillovers produced by the new industries imply that the rise of such industries require co-ordination, which gives rise to multiple equilibria. This explains why even when comparing similar countries or regions, either the traditional sectors or the new business models dominate." pp. 31

Technorati Tags: Genesys, Call-to-Action, Lem, Research, Trends